Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM

Focusing on the rapid rise of China’s housing prices in recent years, in this paper, we construct a model using the cheap talk game that centers on how information receivers in a market make inferences about the true state of the information based on the cost-free signals they receive and then make...

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Autores principales:	Jie Wang, Biyu Peng, Xiaohua Xia, Zhu Ma
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	housing price expectation economic fundamental cheap talk game dynamic GMM estimation Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
Acceso en línea:	https://doaj.org/article/5a8c402ed84c4e4db31c6e896c96846e
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spelling	oai:doaj.org-article:5a8c402ed84c4e4db31c6e896c96846e2021-11-25T19:04:21ZAre Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM10.3390/su1322127912071-1050https://doaj.org/article/5a8c402ed84c4e4db31c6e896c96846e2021-11-01T00:00:00Zhttps://www.mdpi.com/2071-1050/13/22/12791https://doaj.org/toc/2071-1050Focusing on the rapid rise of China’s housing prices in recent years, in this paper, we construct a model using the cheap talk game that centers on how information receivers in a market make inferences about the true state of the information based on the cost-free signals they receive and then make decisions based on these inferences, which in turn affect market equilibrium. By constructing a cheap talk game model of house prices, we examine the correlation between market expectations, economic fundamentals, and individual housing purchase decisions. Then, we conduct an empirical analysis using the dynamic GMM method based on the panel data of 35 large and medium-sized cities in China. The analysis reveals that: (1) when the whole of society expects housing prices to rise, housing prices will rise regardless of the true state of economic fundamentals; (2) when information on economic fundamentals is accurate and reliable, home buyers tend to make purchase decisions based on such information, thus maximizing the utility of society as a whole; but when information on economic fundamentals is unreliable, home buyers tend to make purchase decisions according to their own housing price expectations, which is not conducive to the optimization of the utility of society as a whole; (3) the empirical results also reveal that expectations are a non-negligible factor in the rise of housing prices, and the coefficient of expectations exceeds that of each economic fundamental; this demonstrates the investment-driven attribute of the housing market in China. At the same time, economic fundamentals have a definite effect on housing prices, which implies that the rise of housing prices in China is supported by objective conditions.Jie WangBiyu PengXiaohua XiaZhu MaMDPI AGarticlehousing priceexpectationeconomic fundamentalcheap talk gamedynamic GMM estimationEnvironmental effects of industries and plantsTD194-195Renewable energy sourcesTJ807-830Environmental sciencesGE1-350ENSustainability, Vol 13, Iss 12791, p 12791 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	housing price expectation economic fundamental cheap talk game dynamic GMM estimation Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
spellingShingle	housing price expectation economic fundamental cheap talk game dynamic GMM estimation Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350 Jie Wang Biyu Peng Xiaohua Xia Zhu Ma Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
description	Focusing on the rapid rise of China’s housing prices in recent years, in this paper, we construct a model using the cheap talk game that centers on how information receivers in a market make inferences about the true state of the information based on the cost-free signals they receive and then make decisions based on these inferences, which in turn affect market equilibrium. By constructing a cheap talk game model of house prices, we examine the correlation between market expectations, economic fundamentals, and individual housing purchase decisions. Then, we conduct an empirical analysis using the dynamic GMM method based on the panel data of 35 large and medium-sized cities in China. The analysis reveals that: (1) when the whole of society expects housing prices to rise, housing prices will rise regardless of the true state of economic fundamentals; (2) when information on economic fundamentals is accurate and reliable, home buyers tend to make purchase decisions based on such information, thus maximizing the utility of society as a whole; but when information on economic fundamentals is unreliable, home buyers tend to make purchase decisions according to their own housing price expectations, which is not conducive to the optimization of the utility of society as a whole; (3) the empirical results also reveal that expectations are a non-negligible factor in the rise of housing prices, and the coefficient of expectations exceeds that of each economic fundamental; this demonstrates the investment-driven attribute of the housing market in China. At the same time, economic fundamentals have a definite effect on housing prices, which implies that the rise of housing prices in China is supported by objective conditions.
format	article
author	Jie Wang Biyu Peng Xiaohua Xia Zhu Ma
author_facet	Jie Wang Biyu Peng Xiaohua Xia Zhu Ma
author_sort	Jie Wang
title	Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
title_short	Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
title_full	Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
title_fullStr	Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
title_full_unstemmed	Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM
title_sort	are housing prices sustainable in 35 large and medium-sized chinese cities? a study based on the cheap talk game and dynamic gmm
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/5a8c402ed84c4e4db31c6e896c96846e
work_keys_str_mv	AT jiewang arehousingpricessustainablein35largeandmediumsizedchinesecitiesastudybasedonthecheaptalkgameanddynamicgmm AT biyupeng arehousingpricessustainablein35largeandmediumsizedchinesecitiesastudybasedonthecheaptalkgameanddynamicgmm AT xiaohuaxia arehousingpricessustainablein35largeandmediumsizedchinesecitiesastudybasedonthecheaptalkgameanddynamicgmm AT zhuma arehousingpricessustainablein35largeandmediumsizedchinesecitiesastudybasedonthecheaptalkgameanddynamicgmm
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Are Housing Prices Sustainable in 35 Large and Medium-Sized Chinese Cities? A Study Based on the Cheap Talk Game and Dynamic GMM

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