Information Economics with Real Estate Applications

Description

Information Economics with Real Estate Applications provides the reader with an academic toolkit to understand strategic interactions of individuals and companies in a world of scarce resources and asymmetric information. Beyond theoretical frameworks and models, examples in the real estate and construction industry are used to illustrate the practical relevance of the concepts discussed. Property developers, brokers, construction firms and investment managers – as individuals or companies – make decisions in response to their clients’, customers’ and partners’ behaviours. To align conflicting interests and achieve optimal outcomes for individuals, companies and society at large, those interactions need to be governed efficiently. Using models from microeconomics and contract theory, this book helps the reader to analyse the complex relations between different industry stakeholders from the perspective of markets and organisations. Although it mainly targets students at the Masters or PhD level in real estate or similar subjects without previous knowledge in information economics, the general theory presented should be of interest to any student who wants an introductory text in information economics. At the same time, by building upon real-world examples, the book allows industry practitioners to reflect on and optimise their strategic decision-making in a more structured way. Cover Half Title Title Page Copyright Page Table of Contents Figures Notations Preface Acknowledgements Contributors Part I: Foundations Chapter 1: Basic microeconomics 1.1: Introduction 1.2: Consumers 1.2.1: Preferences 1.2.2: Utility and utility functions 1.2.3: Utility maximisation 1.2.4: Demand 1.2.5: Substitutes and complements 1.3: Producers 1.3.1: Costs 1.3.2 Profit 1.4: Markets 1.4.1: Competitive markets 1.4.2: Monopolies 1.4.3: Summary of different market forms 1.5: Welfare 1.5.1: Welfare for consumers and producers 1.5.2: Welfare on market level 1.5.3: Pareto efficiency 1.6: Literature notes 1.7: Exercises Chapter 2: Game theory 2.1: Introduction 2.2: Static games 2.2.1: Prisoner’s dilemma 2.2.2: Stag hunt 2.2.3 Chicken game 2.3: Dynamic games 2.3.1: Subgames 2.3.2: Subgame perfect Nash equilibria 2.3.3 Folk theorems 2.4: Literature notes 2.5: Exercises Part II: Market perspective Chapter 3: Oligopolies 3.1: Introduction 3.2: Cournot models 3.2.1: Symmetric Cournot models 3.2.2: Symmetric Cournot duopoly 3.2.3: Cartels 3.2.4: Symmetric general Cournot oligopoly model 3.2.5: Asymmetric Cournot models 3.3: Bertrand models 3.4: Stackelberg models 3.5: Monopolistic competition 3.6: Measuring market concentration 3.7: Literature notes 3.8: Exercises Chapter 4: Strategic interactions 4.1: Introduction 4.2: Market entry strategies 4.2.1: Market conditions 4.2.2: An entry game – Part I 4.2.3: An entry game – Part II 4.2.4: Taxonomy of strategies 4.3: Literature notes 4.4: Exercises Part III: Organisational perspective Chapter 5: Models with randomness 5.1: Introduction 5.2: Randomness 5.2.1: Probabilities and random variables 5.2.2: Preferences over random payoffs 5.3: Risk 5.3.1: Attitudes towards risk 5.3.2: Coefficient of absolute risk aversion 5.3.3: Certainty equivalent 5.3.4: Optimal risk-sharing 5.4: Risk and uncertainty 5.5: Literature notes 5.6: Exercises Chapter 6: Contracts 6.1: Introduction 6.2: Theory of the firm 6.3: Principal-agent relationships 6.4: Contract types 6.5: Complete and incomplete contracts 6.6: Asymmetric information and opportunistic behaviour 6.7: Literature notes 6.8 Exercises Chapter 7: Hidden characteristics and adverse selection 7.1: Introduction 7.2: Separating and pooling equilibria 7.3: Hidden characteristics and adverse selection 7.4: Methods to avoid adverse selection 7.4.1: Screening 7.4.2 Signalling 7.5: Literature notes 7.6 Exercises Chapter 8: Hidden actions and moral hazard 8.1: Introduction 8.2: Motivation in principal-agent relationships 8.3: Models with hidden actions 8.3.1: Effort-dependent revenue 8.3.2: Effort-dependent cost 8.3.3: Unknown cost function 8.4: First-best solutions 8.4.1: Effort-dependent revenue 8.4.2: Effort-dependent cost 8.4.3 Unknown cost function 8.5: Methods to avoid moral hazard 8.5.1: Contract structures and incentives 8.5.2: Information systems and performance monitoring 8.5.3: Trust and relationship building 8.6: Literature notes 8.7: Exercises Chapter 9: Property rights 9.1: Externalities 9.2: Coase theorem 9.3: Hold-up problem 9.4: Vertical integration 9.5: Literature notes 9.6: Exercises Appendix A: Additional material A.1: Derivatives A.2: Mixed strategies A.3: Behavioural game theory A.4: Symmetric general Cournot models A.5: Monopolistic competition A.6: Concave and convex functions A.7: Approximation for certainty equivalent A.8: Mathematics of the Stiglitz model A.9: Calculations for the effort-depending model A.10: Calculations for the unkown cost model A.11: Calculations without vertical integration Solutions Bibliography Index