Impossibility of a Competitive Equilibrium in the Real Estate Brokerage Industry
This note shows that the presence of fixed costs (e.g., licence fees, fees for local, state and national realtor associations, continuing education expenses, some of the office expenses, etc.) in the real estate brokerage industry makes it impossible to have competitive commission rates as the equilibrium outcome. In fact, the only pure strategy Nash equilibrium involves monopoly commission rates. This outcome compels alternative equilibrium explanations for the industry and for the future research on brokerage.
Volume (Year): 21 (2001)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323|
Web page: http://www.aresnet.org/
|Order Information:|| Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323|
Web: http://pages.jh.edu/jrer/about/get.htm Email:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Anglin & Richard Arnott, 1999.
"Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis,"
Real Estate Economics,
American Real Estate and Urban Economics Association, vol. 27(4), pages 719-749.
- Arnott, R. & Anglin, P., 1995. "Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis," G.R.E.Q.A.M. 95a21, Universite Aix-Marseille III.
- Richard Arnott & Paul Anglin, 1995. "Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis," Boston College Working Papers in Economics 302., Boston College Department of Economics.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Yinger, John, 1981. "A Search Model of Real Estate Broker Behavior," American Economic Review, American Economic Association, vol. 71(4), pages 591-605, September.
- Bart Wilson, 1998. "What Collusion? Unilateral Market Power as a Catalyst for Countercyclical Markups," Experimental Economics, Springer, vol. 1(2), pages 133-145, September.
- Brown-Kruse, Jamie, et al, 1994. "Bertrand-Edgeworth Competition in Experimental Markets," Econometrica, Econometric Society, vol. 62(2), pages 343-72, March.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- Martin Sefton & Abdullah Yavas & Eric Abrams, 2000. "An experimental comparison of two search models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 735-749.
- Dan Alger, 1987. "Laboratory Tests of Equilibrium Predictions with Disequilibrium Data," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 105-145.
- Sirmans, C. F. & Turnbull, Geoffrey K., 1997. "Brokerage Pricing under Competition," Journal of Urban Economics, Elsevier, vol. 41(1), pages 102-117, January.
- Carroll, Wayne, 1989. "Fixed-Percentage Commissions and Moral Hazard in Residential Real Estate Brokerage," The Journal of Real Estate Finance and Economics, Springer, vol. 2(4), pages 349-65, December.
- Davis, Douglas D. & Williams, Arlington W., 1986. "The effects of rent asymmetries in posted offer markets," Journal of Economic Behavior & Organization, Elsevier, vol. 7(3), pages 303-316, September.
- 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.
- Williams, Joseph T, 1998. "Agency and Brokerage of Real Assets in Competitive Equilibrium," Review of Financial Studies, Society for Financial Studies, vol. 11(2), pages 239-80.
- Bartlett, Randall, 1981. "Property Rights and the Pricing of Real Estate Brokerage," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 79-94, September.
- Schroeter, John R., 1987. "Competition and Value-Of-Service Pricing in the Residential Real Estate Brokerage Market," Staff General Research Papers 11116, Iowa State University, Department of Economics.
- 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.
- James R. Follain & Terry Lutes & David A. Meier, 1987. "Why Do Some Real Estate Salespeople Earn More Than Others?," Journal of Real Estate Research, American Real Estate Society, vol. 2(1), pages 73-81.
When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:21:n:3:2001:p:187-200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (JRER Graduate Assistant/Webmaster)
If references are entirely missing, you can add them using this form.