Information and competitive equilibria in the housing market

This paper derives necessary and sufficient conditions for the existence and occurrence likelihood of competitive equilibria in urban land and housing markets: (i) when there is imperfect information causing costly search trips and (ii) when land and housing are differentiated according to between‐zone and within‐zone heterogeneity. Such competitive equilibria are contingent on the possibility that consumers spill over into the markets of less preferred zones. The main conclusions are that markets tend to be partitioned into homogeneous sub‐groups and when they do not, heterogeneity may hamper the effectiveness of search and hence work against the existence of competitive equilibria.