Tweaking the DiPasquale–Wheaton–Colwell model

The so-called “four-quadrant” model (DiPasquale and Wheaton in R Estate Econ 20(1):181–197, 1992) is probably the most popular and most studied model of long-run equilibrium in aggregate housing markets. Nevertheless, it has some drawbacks. Colwell (J Hous Econ 11(1):24–39, 2002), therefore, adds new devices to the model (referred to as “tweaks”) to remove several important drawbacks. However, also the modified version of the “four-quadrant” model neglects a very important feature of housing markets: the search-and-matching process. Hence, we add to the DiPasquale–Wheaton–Colwell model the key features of this (time-consuming) process. This theoretical integration is relatively simple but economically profound, since the model is now characterised by a decentralised and uncoordinated equilibrium.