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Advertising and Natural Vacancies in Rental Housing Markets

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  • Colin Read

Abstract

We formulate a model that explains vacancy durations arising from lags in matches between the suppliers and demanders of housing units. We emphasize rental housing markets in this exposition although the model could be extended to competitive or noncompetitive rental or home‐ownership markets. In the case of rental markets, if tenants do not immediately inform landlords upon initiating search for a new unit, landlords are delayed in their search for a new tenant. These matching delays induce a positive natural vacancy rate that cannot be reduced to zero, even in competitive markets. Price‐taking landlords are, however, able to affect the resulting vacancy duration through advertising in a Cournot‐Nash equilibrium and will, in general, invest in inefficient levels of advertising. As a consequence, there may be a role for public policy to provide incentives that would induce noncooperative landlords to choose the vacancy cost‐minimizing advertising solution.

Suggested Citation

  • Colin Read, 1988. "Advertising and Natural Vacancies in Rental Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 354-363, December.
    • Handle: RePEc:bla:reesec:v:16:y:1988:i:4:p:354-363
    DOI: 10.1111/1540-6229.00460
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    1. repec:hal:spmain:info:hdl:2441/9023 is not listed on IDEAS
    2. repec:spo:wpecon:info:hdl:2441/8988 is not listed on IDEAS
    3. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    4. Etienne Wasmer, 2005. "Housing market discrimination, housing regulations and intermediaries," Sciences Po publications info:hdl:2441/9023, Sciences Po.
    5. Forgionne, G. A., 1996. "Forecasting army housing supply with a DSS-delivered econometric model," Omega, Elsevier, vol. 24(5), pages 561-576, October.
    6. Joseph L. Pagliari, Jr. & James R. Webb, 1996. "On Setting Apartment Rental Rates: A Regression-Based Approach," Journal of Real Estate Research, American Real Estate Society, vol. 12(1), pages 37-62.
    7. repec:hal:wpspec:info:hdl:2441/9023 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/8988 is not listed on IDEAS
    9. Rose Lai & Ko Wang & Jing Yang, 2007. "Stickiness of Rental Rates and Developers’ Option Exercise Strategies," The Journal of Real Estate Finance and Economics, Springer, vol. 34(1), pages 159-188, January.
    10. Rena Sivitanidou, 1999. "Office Rent Processes: The Case of U.S. Metropolitan Markets," Working Paper 8664, USC Lusk Center for Real Estate.
    11. repec:spo:wpecon:info:hdl:2441/9023 is not listed on IDEAS
    12. Etienne Wasmer, 2005. "Housing market discrimination, housing regulations and intermediaries," SciencePo Working papers hal-01053551, HAL.
    13. Carolin Fritzsche & Lars Vandrei, 2018. "Causes of Vacancies in the Housing Market – A Literature Review," ifo Working Paper Series 258, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    14. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    15. Viggo Nordvik, 2000. "Utilisation of the Stock of Owner-occupied Single-family Houses: An Econometric Analysis," Urban Studies, Urban Studies Journal Limited, vol. 37(7), pages 1171-1183, June.
    16. Lawrence Kryzanowski & Yanting Wu, 2023. "Signaling effects of recurrent list‐price reductions on the likelihood of house sales," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(1), pages 99-130, February.
    17. repec:hal:wpspec:info:hdl:2441/8988 is not listed on IDEAS

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