Heterogeneous expectations, housing bubbles and tax policy

Abstract We integrate a plausible expectation formation and learning scheme of boundedly rational investors into standard user cost housing market model, involving rental capital market. In particular, switch between heterogeneous rules according to an evolutionary fitness measure, given by the rules’ past profitability. analytically show that our model may produce endogenous boom-bust dynamics. Furthermore, we demonstrate policy makers use as tool explore how different tax policies affect market’s steady state, its stability out-of-equilibrium behavior.