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- Disentangling housing supply to shift towards Smart Cities: analysing theoretical and empirical studiesPublication . Garcês, Pedro; Pires, Cesaltina Pacheco; Costa, Joana; Jorge, Sílvia Ferreira; Catalão-Lopes, Margarida; Alventosa, AdrianaThe search for a pleasant home has concerned people ever since. Paradoxically, people are facing strong difficulties in finding a decent place to settle their lives in cities. As such, the housing market regained momentum in connection with the development of Smart Cities, where life quality of residents is strongly emphasized. Well-being in the metropolis is affected by a wide variety of factors with housing supply being among the most important, hence stirred by financing costs, construction costs, vacancy rate, sales delay, inflation rate, housing stock, price of agricultural land, and regulation. The present article reviews empirical studies on housing supply for a better understanding of the dynamics in this market, shedding some light on the expectable outcomes of policy actions in the promotion of sustainable housing towards the smart city transition. Our review shows that the long-run price elasticity of housing supply is larger than the short-run, as well as the existence of substantial differences in the price elasticity across countries and regions. As such, overall, the hypothesis of a perfectly elastic supply is rejected. In addition, our review highlights that housing supply is negatively related to financial costs, inflation, sales delay, and the existence of regulatory or physical constraints. Also, the elasticity is lower when there are regulatory constraints. Newfangled strategic interaction models, though overlooked in the literature, reinforce that housing does not fit the perfect competition frame. The review proves that we are in face of a non-competitive market in which policy intervention is required to maximize social welfare; policy packages to grant people access to the housing market may be required. However, policy interventions should be carefully designed and clear, to mitigate their potentially negative impact on the housing supply as adverse results may be harmful to the transition towards a smart city.
- Quality-price choices and market configurations when location mattersPublication . Pires, Cesaltina Pacheco; Catalão-Lopes, Margarida; Jorge, Sílvia Ferreira; Garcês, PedroThis paper investigates how preexistent asymmetries in the way consumers value each firm's product influence quality-price decisions when consumers differ in quality valuation but incur a transportation cost when buying from the firm located on the periphery. We show that for a given location, the high-quality firm charges a higher price and that for given qualities, the firm located in the center charges higher prices. Regarding quality choices, we show that the firm located in the center may be able to behave as a partial coverage monopolist. Under duopoly, quality differentiation always exists, and in general, the high-quality firm may be located either in the center or on the periphery. Moreover, the qualities offered by both firms are higher when the high-quality firm is on the periphery, showing a substitutability effect between location and quality. Thus, incentivizing the high-quality firm to locate on the periphery improves overall market quality.