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Real Estate Brokers, Nonprice Competition and the Housing Market

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  • Geoffrey K. Turnbull

Abstract

Given a fixed commission rate and easy entry, economic profits must be competed away on some nonprice margin in the real estate brokerage market. This paper focuses on nonprice competition in the level or quality of services offered buyers and sellers in the market, examining the equilibrium adjustment process, comparative static predictions and efficiency implications. In contrast with earlier studies focusing on wasteful advertising, this paper demonstrates that higher commission rates can either increase or decrease deadweight loss, depending upon how broker services affect buyer and seller transaction costs. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Geoffrey K. Turnbull, 1996. "Real Estate Brokers, Nonprice Competition and the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(3), pages 293-316.
  • Handle: RePEc:bla:reesec:v:24:y:1996:i:3:p:293-316
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00692
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    Cited by:

    1. 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).
    2. Bruce, Donald & Santore, Rudy, 2006. "On optimal real estate commissions," Journal of Housing Economics, Elsevier, vol. 15(2), pages 156-166, June.
    3. Chang-Tai Hsieh & Enrico Moretti, 2003. "Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1076-1122, October.
    4. Jonathan Wiley & Justin Benefield & Marcus Allen, 2014. "Cyclical Determinants of Brokerage Commission Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 196-219, January.

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