Capital modeling Monopoly

I’m talking about the board game. The basic strategy dictates that you should always buy a property when you land on it.

But if you are trading a property, what is it worth? Centives, an economics blog at Lehigh University, created a model. (It looks deterministic to me.) It seems like a discounted cash flow model, except in Monopoly, interest rates are 0% – loans are interest-free.

You type in the property name, number of players and number of extra rounds you think the game will go, and it estimates what a property is worth.

As actuaries, you want to know the assumptions. Key ones include:

  • All properties complete monopolies upon acquisition.
  • All properties have hotels constructed immediately after purchase.

I played around with it a bit. Basically Boardwalk grinds everything else to dust.

(h/t Tyler Cowen.)

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One thought on “Capital modeling Monopoly

  1. ruidh says:

    Loans aren’t free, but a loan for 1 turn costs the same as a loan for many.

    There’s an inflection point in the ROI at 3 houses. It makes sense to borrow to get to three. I don’t think it makes sense to borrow to go past 3.

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