A conceptual design for a bilateral agent-based land market with heterogeneous economic agents

Abstract:

This paper presents a conceptual design for an agent-based bilateral residential land market. The design includes interactions between multiple buyers and sellers (household agents, developers, and rural land owners) and two local feedbacks to land value—price expectation formation based on local neighborhoods and spatial externalities. To address the methodological challenges inherent in the transition from equilibrium-based analytical models to agent-based simulation, we combine traditional deductive optimization models of behavior at the agent level with inductive models of price expectation formation. Relative to previous models, our proposed model is more closely linked to urban economics; contains a wider range of drivers of land use (LU); and addresses alternative models of division of gains from trade and determination of transaction prices, including models of bid and ask price formation. Our proposed approach is also closely linked to geographic cellular LU models, potentially uniting the strengths of these two disciplinary perspectives.