Expectations and the timing of neighborhood change

David M. Frankel*, Ady Pauzner

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Scopus citations


We study the role of expectations when agents have a preference for segregation and households face moving frictions. In a fixed environment, there are multiple equilibria: agents' expectations determine whether an ethnic transition occurs. However, the outcome is unique if there is a deterministic trend that gradually makes the neighborhood more appealing to the outside group. It is also unique if the relative payoff from living in the neighborhood is subject to small shocks. In both cases, the insiders must leave at the first possible moment: when the outsiders would outbid them if an immediate ethnic transition were expected.

Original languageEnglish
Pages (from-to)295-314
Number of pages20
JournalJournal of Urban Economics
Issue number2
StatePublished - 2002


FundersFunder number
Pinhas Sapir Center for Development
Bar-Ilan University
Stanford University
Tel Aviv University


    • Multiple equilibria
    • Neighborhood change
    • Rational expectations
    • Tipping


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