Endogenous Price Bubbles in a Multi-Agent System of the Housing Market

Roy Kouwenberg, Remco Zwinkels

Research output: Contribution to journalArticleAcademicpeer-review

22 Citations (Scopus)


Economic history shows a large number of boom-bust cycles, with the U.S. real estate market as one of the latest examples. Classical economic models have not been able to provide a full explanation for this type of market dynamics. Therefore, we analyze home prices in the U.S. using an alternative approach, a multi-agent complex system. Instead of the classical assumptions of agent rationality and market efficiency, agents in the model are heterogeneous, adaptive, and boundedly rational. We estimate the multi-agent system with historical house prices for the U.S. market. The model fits the data well and a deterministic version of the model can endogenously produce boom-and-bust cycles on the basis of the estimated coefficients. This implies that trading between agents themselves can create major price swings in absence of fundamental news.
Original languageEnglish
Pages (from-to)e0129070
JournalPLoS One (online)
Issue number6
Publication statusPublished - 2015


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