An equilibrium-econometric analysis of rental housing markets with indivisibilities

Abstract

We develop a theory of an equilibrium-econometric analysis of rental housing markets with indivisibilities. It provides a bridge between a (competitive) market equilibrium theory and a statistical/econometric analysis. The listing service of apartments provides the information to both economic agents and an econometric analyzer: each economic agent uses a small part of the data from the service for his economic behavior, and the analyzer uses them to estimate the market structure. It is argued that the latter may be done by assuming that the economic agents take the standard price-taking behavior. We apply our theory to the data in the rental housing markets in the Tokyo area, and examine the law of diminishing marginal utility for household. It holds strictly with respect to the consumption, less with commuting time-distance, and much less with the sizes of apartments.