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Competition and Efficiency in Transacting: The Case of Residential Real Estate Brokerage

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  • John H. Crockett

Abstract

This paper examines the functioning of the market for brokerage services for residential real estate. The central issue addressed is whether the manner in which brokerage services have traditionally been provided and priced is consistent with efficiency. In approaching this question, the paper first describes the activities usually associated with the brokerage function and develops criteria for the efficient provision of brokerage services. After the structural characterisitcs and pricing practices of the brokerage industry are analyzed, a model of brokerage firm competition is developed. The principal finding is that the traditional absence of price competition among brokers may have led to an inefficiently large commitment of resources to the brokerage industry, supported by excessive rates for consumers of brokerage services. These results stem from the way that competitive pressures emerge when price competition is largely suppressed. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • John H. Crockett, 1982. "Competition and Efficiency in Transacting: The Case of Residential Real Estate Brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(2), pages 209-227.
  • Handle: RePEc:bla:reesec:v:10:y:1982:i:2:p:209-227
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    Cited by:

    1. Randy I. Anderson & Robert Fok & Leonard V. Zumpano & Harold W. Elder, 1998. "Measuring the Efficiency of Residential Real Estate Brokerage Firms," Journal of Real Estate Research, American Real Estate Society, vol. 16(2), pages 139-158.
    2. Natalya Delcoure & Norm G. Miller, 2001. "The Future of the US Residential Real Estate Brokerage Industry in Light of the Internet and International Indications," ERES eres2001_147, European Real Estate Society (ERES).
    3. T.L. Tyler Yang & Joseph W. Trefzger & Lawrence F. Sherman, 1997. "A Microeconomic Study of Commercial Real Estate Brokerage Firms," Journal of Real Estate Research, American Real Estate Society, vol. 13(2), pages 177-194.
    4. Thomas Miceli & Katherine Pancak & C. Sirmans, 2007. "Is the Compensation Model for Real Estate Brokers Obsolete?," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 7-22, July.
    5. Xun Bian & Bennie D. Waller & Abdullah Yavas, 2017. "Commission Splits in Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 165-187, February.
    6. Abdullah Yavas, 2001. "Impossibility of a Competitive Equilibrium in the Real Estate Brokerage Industry," Journal of Real Estate Research, American Real Estate Society, vol. 21(3), pages 187-200.
    7. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    8. Thomas J. Miceli, 1989. "The Optimal Duration of Real Estate Listing Contracts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 267-277.
    9. William C. Goolsby & Barbara J. Childs, 1988. "Brokerage Firm Competition in Real Estate Commission Rates," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 79-85.
    10. Sirmans, C. F. & Turnbull, Geoffrey K., 1997. "Brokerage Pricing under Competition," Journal of Urban Economics, Elsevier, vol. 41(1), pages 102-117, January.
    11. repec:kap:jrefec:v:55:y:2017:i:2:d:10.1007_s11146-016-9558-z is not listed on IDEAS
    12. Patric H. Hendershott & Thomas G. Thibodeau & Halbert C. Smith, 2009. "Evolution of the American Real Estate and Urban Economics Association-super-1," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(4), pages 559-598.
    13. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    14. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, Elsevier.

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