Microeconomic model of residential location incorporating life cycle and social expectations

a r t i c l e i n f o This paper is focused on the dynamics of residential location decisions based on the microeconomic theory of urban land use, in which we assume that each property is assigned to the agent with the highest bid. The agents' behavior includes expectations of their future based on the life cycle or social influence processes, which are anticipated or solved using a hypothesis of imitation of the behavior of other households currently living in those situations. Relocation decisions are then modeled, incorporating expected utilities by means of transition probabilities among households. An imitation multi-objective bid function is postulated for each alternative location depending on the expected income per unit of time, the current household value of amenities and the expected value obtained by the imitated agent in this location. A multinomial logit model is assumed to calculate the location equilibrium, where willingness to pay is determined by dwelling characteristics and spatial socioeconomic segregation (location externalities). Numerical examples and simulations are presented using linear bid functions to explain the proposed modeling approach and the impact of imitation on the dynamics of residential segregation. The study of land use dynamics in the context of an urban system involves the description and modeling of interactions between a variety of agents that change their socioeconomic characteristics and preferences over time and, therefore, make different decisions across both time and space during the residential relocation process. This dynamic feature appears as the result of various issues, such as the joint location decision of various households. These issues, in turn, affect the urban system's configuration, causing variations in real estate market behavior. In addition , there are some processes associated with the location decisions of households that are not explicitly considered in classical models of short-and long-term urban land use equilibrium, such as social learning , imitation, the formation of habits, the generation of expectations, uncertainty regarding availability of resources and fluctuation/ disruption of the social and economic changes that establish a complex system. In particular, households have internal dynamics such as changes in life cycles, changes in structure, and social interactions (new children, divorce, job changes, level of education, etc.), which affect consumption patterns and residential location. In addition, there are variations in urban land use due to the generation of new real estate projects in different areas of a city, motivating relocations. This type of …