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Inattention in the Rental Housing Market: Evidence from a Natural Experiment

Author

Listed:
  • Eva M. Berger

    (Johannes Gutenberg-University Mainz, Germany)

  • Felix Schmidt

    (Johannes Gutenberg-University Mainz, Germany)

Abstract

We investigate the question of whether agents on the rental housing market are inattentive to sizeable side costs of renting, namely commissions payable by renters to real estate agents appointed by landlords. We exploit a natural experiment created by a policy reform in Germany that shifted the payment liability for commissions from renters to landlords. Based on panel data on offers for apartments to rent, we find evidence for substantial inattention. This has allocative as well as distributional consequences as it implies an inefficiently high demand for real estate agent services at the expense of renters.

Suggested Citation

  • Eva M. Berger & Felix Schmidt, 2017. "Inattention in the Rental Housing Market: Evidence from a Natural Experiment," Working Papers 1716, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 06 Sep 2019.
    • Handle: RePEc:jgu:wpaper:1716
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    References listed on IDEAS

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    Keywords

    Housing Market; Rental Prices; Real Estate Agent Commissions; Bounded Rationality;
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