Game Theory Analysis And Policy Choices On The Principal Part Of China’s Real-estate Market

This thesis aims to use Rational Expectation Theory and Game Theory to explore the micro mechanism of how the real estate market operates and develops, and, based on the analysis, proposes governmental policies to help China’s real estate market to develop harmoniously, in expectation of providing guidance for China’s real estate market to develop healthily.The movement and development of real estate market are the results of the interaction among the principal parts of the market. Principal parts have the attribute of rational expectation and actions of gaming on the basis of rational expectation. There are both cooperative games and uncooperative games. Games among the Main parts of real estate market have an intrinsic lawof logical evolution.Influenced by policies, China’s real estate market has gone through deferent stages. The development of China’s real estate market has make a significant contribution in terms of meeting the housing demand of consumers, accelerating the economic growth and the urbanization of cities, regions and the country. However, in the process of development, we have been facing some problems such as too mach fluctuation, excessive high price and general control failure etc. these problems are the results of gaming by the principal part of the real estate market.Game between Real estate developers and consumers is the core of the game played by the principal part of the market. The cooperative solutions for the bargaining between developers and consumers are influenced by the market competiveness, individual bargaining power and fair knowledge. Real estate developers have strong bargaining power over consumers who have rigid housing demand. The speculative buyers are the important unstable factors in the market. Cooperative games for land trading between developers and governments improve the efficiency and lower the land prices. The existence of the economic interests of government often makes the supervision on developers have no effectiveness. Consumers have a little supervisory power; it makes the Government’s promise of controlling the housing prices become invalid. Competitions among consumers push the prices to rise. The cooperation, publicly or privately, between developers makes the housing prices hard to fall. Pursuit of local economic interests and Information asymmetry makes local governments to implement Central Government’s controlling policies inactively.Games between banks and borrowers still have the cooperative attribute as trading games. Borrowers have incomplete asymmetry information compared with banks. Banks face reversed choices when using interest rate to sift the quality of projects. On the condition of information asymmetry, banks have the motivation to implement the controlling policies inactively when they are driven by their own interests. Lower the lending standard is one of the expressions of this inactivity.The excessive pursuit of economic interest is the main reason for the ineffectiveness of the control on the real estate market. Therefore, the activities governments should be reasonably positioned. The subprime crisis provides us with a deep lesson that in order to make the real estate market to develop harmoniously, the Government should formulate and implement reasonable policy on land, tax, finance, welfare, trading,information and cultural education.