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Efficiency Pricing, Tenancy Rent Control and Monopolistic Landlords

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  • Kaushik Basu
  • Patrick M. Emerson

Abstract

This paper presents a model of 'tenancy rent control' where rent increases on, and evictions of, sitting tenants are prohibited but nominal rents for "new" tenants are unrestricted. If there is "any" inflation, landlords prefer to take short-staying tenants. If there is no way for landlords to tell a tenant's type, an adverse selection problem arises. If landlords have monoply power, then they may prefer not to raise the rent even when there is excess demand for housing. These 'efficiency rents' show that tenancy rent control can give rise to equilibria that look as if there were a flat ceiling on rents. Copyright The London School of Economics and Political Science 2003.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 70 (2003)
Issue (Month): 278 (05)
Pages: 223-232

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Handle: RePEc:bla:econom:v:70:y:2003:i:278:p:223-232

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Cited by:
  1. Richard Arnott & Elizaveta Shevyakhova, 2008. "Tenancy Rent Control And Credible Commitment In Maintenance," Working Papers 200812, University of California at Riverside, Department of Economics, revised Sep 2008.
  2. Juan S. Mora, 2008. "The institutions of house tenancy markets in post-war Western Europe: an economic analysis," Working Papers in Economic History wp08-11, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  3. Deininger, Klaus & Jin, Songqing & Nagarajan, Hari K., 2007. "Efficiency and equity impacts of rural land rental restrictions : evidence from India," Policy Research Working Paper Series 4324, The World Bank.
  4. Le Blanc, David, 2005. "Economic evaluation of housing subsidy systems: a methodology with application to Morocco," Policy Research Working Paper Series 3529, The World Bank.
  5. Katherine Cuff Nicolas Marceau, 2007. "Tenancy Default, Excess Demand and the Rental Market," Department of Economics Working Papers 2007-08, McMaster University.
  6. Jin, Songqing & Deininger, Klaus W. & Nagarajan, Hari K., 2006. "Equity and efficiency impacts of rural land rental restrictions: Evidence from India," 2006 Annual meeting, July 23-26, Long Beach, CA 21305, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Juan S. Mora-Sanguinetti, 2011. "The Regulation of Residential Tenancy Markets in Post-War Western Europe: An Economic Analysis," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(1), pages 47-75, June.

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