LOCATION AND HOUSING DEMAND WITH ENDOGENOUS CONSUMPTION RISK

This paper presents the theory of housing and residential location demand under endogenous housing consumption risk. Housing consumption is modeled as stochastically related to the level of planned consumption, with the stochasticity arising from structure-specific factors or external factors. Because the uncertainty effects of many factors can be vitiated to varying degrees by household choice, though, the uncertainty confronting the household is endogenous to some extent. The relationships between endogenous risks and housing prices and housing and location demands are derived and explained.