Munich Personal RePEc Archive

The behaviour of housing developers and aggregate housing supply

Łaszek, Jacek and Olszewski, Krzysztof (2014): The behaviour of housing developers and aggregate housing supply. Published in: Kwartalnik Nauk o Przedsiębiorstwie (published in Polish as: Zachowania firmy deweloperskiej na rynku mieszkań i zagregowana podaż) , Vol. 32, (2014): pp. 71-87.

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Abstract

The article presents an analysis of the developer sector, which takes into account the ob-served functioning of the market. The analysis is based on the assumption that the housing developer, due to the asymmetry of information, is able to take advantage of a local monopoly and differentiate prices. This allows him to sell apartments of a similar construction to each client at a different price, thanks to which he maximizes profits. However, when the developer overestimates demand or the competition gets tougher, his production costs grow and the possibility to differentiate prices is reduced. This has a direct impact on the profits that he can generate. The consequence of this phenomenon is a more flexible ex post curve of developer supply. As a result, there is a tendency to overproduction in the developer sector, which deepens the cyclical nature of the housing market.

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