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The Welfare Effects of Non‐Price Competition Among Real Estate Brokers
Author(s) -
Miceli Thomas J.
Publication year - 1992
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00594
Subject(s) - competition (biology) , welfare , real estate , commission , economics , database transaction , microeconomics , transaction cost , business , monetary economics , industrial organization , market economy , finance , ecology , biology , programming language , computer science
This paper examines the role of brokers in economizing on transaction costs in the housing market. By lowering the cost of transactions, brokers create welfare gains compared to a market in which buyers and sellers transact on their own. However, if brokers engage in unproductive, non‐price competition to acquire a larger share of available listings, then some of the welfare gains are dissipated. Using a partial equilibrium model, this paper shows how an excessive commission rate can lead to this result.