Monopoly in Real Life - The Housing Market, Finance and Inequality

Konferenzbeitrag

This paper uses a simple model based on the board game Monopoly to analyze the drivers of house prices and wealth inequality. Simulations show that inequality generally builds up fast even if players have equal starting conditions and house prices are stable; rising house prices imply more extreme inequality. An extension of the classical game with interest rates and debt-financing further shows that low interest rates facilitate a property carry trade and increase house prices and inequality by more than high interest rates. The simulations also demonstrate a first-mover advantage both within a generation and between generations and the non-exogenous nature of wealth accumulation, i.e. without new money owing into the housing market, house prices do not go up and wealth differences are less extreme. Overall, despite the model's simplicity it presents striking similarities with empirical evidence.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Political Economy I ; No. B12-V2

Classification and Topics

• Classification: Wirtschaft ; Household Behavior: General ; Personal Income, Wealth, and Their Distributions ; Market Structure, Pricing, and Design: Monopoly ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; Money and Interest Rates: Forecasting and Simulation: Models and Applications ; Central Banks and Their Policies ; Real Estate Markets, Spatial Production Analysis, and Firm Location: General
• Subject: house prices ; debt ; inequality ; monetary policy ; board game Monopoly ; Cantillon effect ; Ponzi scheme

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baur, Dirk
• Event: Veröffentlichung
• (who): ZBW - Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/203547
• Last update: 10.03.2025, 11:41 AM CET