The costs of free entry: an empirical study of real estate agents in Greater Boston.
This article studies the consequences of fixed commissions and low entry barriers in Greater Boston's real estate brokerage industry from 1998-2007. We find that agent entry reduces average service quality and use a dynamic empirical model to study the inefficiency in the current market structure. T...
| Publicado en: | RAND Journal of Economics (Wiley-Blackwell) Vol. 46; no. 1; pp. 103 - 146 |
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| Autores principales: | , |
| Formato: | Artículo |
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Wiley-Blackwell
Spring2015
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| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | This article studies the consequences of fixed commissions and low entry barriers in Greater Boston's real estate brokerage industry from 1998-2007. We find that agent entry reduces average service quality and use a dynamic empirical model to study the inefficiency in the current market structure. To accommodate a large state space, we approximate the value function using sieves and impose the Bellman equation as an equilibrium constraint. Our results suggest that a 50% cut in commissions would result in 40% fewer agents, social savings that amount to 23% of industry revenue, and 73% more transactions for the average agent. |
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