Teaching the DiPasquale-Wheaton Model

Abstract

The DiPasquale-Wheaton (1992) model graphically determines rental price, asset price, newly constructed stock, and total stock in a real estate market. Despite its frequent use in academic research, few textbooks exposit the model. I conjecture this is due in part to the difficulty of deriving its comparative static results. I derive a supply curve that simplifies graphical analysis and perform a complete graphical comparative static analysis. Although the main objective of this paper is to encourage pedagogical usage of the model, an Appendix provides a mathematical derivation of the comparative static results, which has not heretofore appeared in the literature.