When speculators meet suppliers : positive versus negative feedback in experimental housing markets

Asset markets like stock markets are characterized by positive feedback through speculative demand. But the supply of housing is endogenous, and adds negative feedback to the housing market. We design an experimental housing market and study how the strength of the negative feedback, i.e., the price...

Full description

Saved in:
Bibliographic Details
Main Authors: Bao, Te, Hommes, Cars
Other Authors: School of Social Sciences
Format: Article
Language:English
Published: 2020
Subjects:
Online Access:https://hdl.handle.net/10356/142769
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Nanyang Technological University
Language: English
id sg-ntu-dr.10356-142769
record_format dspace
spelling sg-ntu-dr.10356-1427692021-02-09T08:26:15Z When speculators meet suppliers : positive versus negative feedback in experimental housing markets Bao, Te Hommes, Cars School of Social Sciences Economic Growth Centre Social sciences::Economic theory Rational Expectations Learning Asset markets like stock markets are characterized by positive feedback through speculative demand. But the supply of housing is endogenous, and adds negative feedback to the housing market. We design an experimental housing market and study how the strength of the negative feedback, i.e., the price elasticity of supply, affects market stability. In the absence of endogenous housing supply, the experimental markets exhibit large bubbles and crashes because speculators coordinate on trend-following expectations. When the positive feedback through speculative demand is offset by the negative feedback of elastic housing supply the market stabilizes and prices converge to fundamental value. Individual expectations and aggregate market outcome are well described by the heuristics switching model. Our results suggest that negative feedback policies may stabilize speculative asset bubbles. Accepted version 2020-06-30T03:49:12Z 2020-06-30T03:49:12Z 2019 Journal Article Bao, T., & Hommes, C. (2019). When speculators meet suppliers : positive versus negative feedback in experimental housing markets. Journal of Economic Dynamics and Control, 107, 103730-. doi:10.1016/j.jedc.2019.103730 0165-1889 https://hdl.handle.net/10356/142769 10.1016/j.jedc.2019.103730 2-s2.0-85071625788 107 en Journal of Economic Dynamics and Control © 2019 Elsevier B.V. All rights reserved. This paper was published in Journal of Economic Dynamics and Control and is made available with permission of Elsevier B.V. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Social sciences::Economic theory
Rational Expectations
Learning
spellingShingle Social sciences::Economic theory
Rational Expectations
Learning
Bao, Te
Hommes, Cars
When speculators meet suppliers : positive versus negative feedback in experimental housing markets
description Asset markets like stock markets are characterized by positive feedback through speculative demand. But the supply of housing is endogenous, and adds negative feedback to the housing market. We design an experimental housing market and study how the strength of the negative feedback, i.e., the price elasticity of supply, affects market stability. In the absence of endogenous housing supply, the experimental markets exhibit large bubbles and crashes because speculators coordinate on trend-following expectations. When the positive feedback through speculative demand is offset by the negative feedback of elastic housing supply the market stabilizes and prices converge to fundamental value. Individual expectations and aggregate market outcome are well described by the heuristics switching model. Our results suggest that negative feedback policies may stabilize speculative asset bubbles.
author2 School of Social Sciences
author_facet School of Social Sciences
Bao, Te
Hommes, Cars
format Article
author Bao, Te
Hommes, Cars
author_sort Bao, Te
title When speculators meet suppliers : positive versus negative feedback in experimental housing markets
title_short When speculators meet suppliers : positive versus negative feedback in experimental housing markets
title_full When speculators meet suppliers : positive versus negative feedback in experimental housing markets
title_fullStr When speculators meet suppliers : positive versus negative feedback in experimental housing markets
title_full_unstemmed When speculators meet suppliers : positive versus negative feedback in experimental housing markets
title_sort when speculators meet suppliers : positive versus negative feedback in experimental housing markets
publishDate 2020
url https://hdl.handle.net/10356/142769
_version_ 1692012941917814784