Agent-Based Models in Industrial Economics: A Perspective of the Kuwaiti Housing Market Structure

Abstract

Purpose: This study provides an introduction to the agent-based modeling approach in industrial economics, with a focus on the Kuwaiti housing market structure. It develops and analyzes an illustrative agent-based market model.
Study design/methodology/approach: We construct an agent-based model to study the effects of search costs and the number of speculators on housing price volatility. We also illustrate the agent-based modeling process using NetLogo and R.
Sample and data: Our data consists of housing-related policies passed in Kuwait over the last two decades. We discuss relevant studies from industrial economics and housing literature based on their applicability to Kuwait’s housing market structure.
Results: Our findings suggest that both lower search costs and a higher number of speculators lead to lower price volatility. We also demonstrated that agent-based modeling has significant potential for assessing policy impacts on housing markets. Features
from other industrial economics models can be incorporated into the Kuwaiti housing market framework.
Originality/value: This study bridges a gap in the literature by demonstrating how agent-based models can enhance understanding of policy effects on Kuwait’s housing market structure. It also highlights the benefits of integrating elements from industrial
economics models into agent-based housing models.
Research limitations/implications: While agent-based models offer potential applications in Kuwait, their design, testing, and validation require interdisciplinary efforts.