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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.

Suggested Citation

  • Kaushik Basu & Patrick M. Emerson, 2003. "Efficiency Pricing, Tenancy Rent Control and Monopolistic Landlords," Economica, London School of Economics and Political Science, vol. 70(278), pages 223-232, May.
  • Handle: RePEc:bla:econom:v:70:y:2003:i:278:p:223-232
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    Cited by:

    1. Katherine Cuff Nicolas Marceau, 2007. "Tenancy Default, Excess Demand and the Rental Market," Department of Economics Working Papers 2007-08, McMaster University.
    2. 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.
    3. Arnott, Richard & Shevyakhova, Elizaveta, 2014. "Tenancy rent control and credible commitment in maintenance," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 72-85.
    4. Mora, Juan S., 2008. "The institutions of house tenancy markets in post-war Western Europe : an economic analysis," IFCS - Working Papers in Economic History.WH wp08-11, Universidad Carlos III de Madrid. Instituto Figuerola.
    5. repec:ebl:ecbull:eb-17-00777 is not listed on IDEAS
    6. 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.
    7. Deininger, Klaus & Jin, Songqing & Nagarajan, Hari K., 2008. "Efficiency and equity impacts of rural land rental restrictions: Evidence from India," European Economic Review, Elsevier, vol. 52(5), pages 892-918, July.
    8. 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).
    9. Christos Constantatos, 2007. "Excessive Rents and Non-Compliance with Price Ceilings," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(2), pages 225-231.

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