A search model of rental markets: Who should pay the commission?

Andras Niedermayer, Chengsi Wang

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

We develop a dynamic search equilibrium model of rental markets with brokerage fees. An endogenous mass of landlords and tenants is active in the search market. While the mass of entering tenants is exogenous, the mass of entering landlords is endogenously determined by the rate at which apartments become vacant. Brokerage fees paid by tenants are used as a device to screen short term and long term tenants. We analyze a policy that requires fees to be paid by landlords. Such a policy decreases efficiency by preventing efficient screening, but also increases turnover and hence efficiency in the search market. We further provide empirically testable implications of our theory.

Original languageEnglish
Pages (from-to)214-235
Number of pages22
JournalInternational Journal of Industrial Organization
Volume58
DOIs
Publication statusPublished - May 2018

Keywords

  • Appointment principle
  • Brokerage fees
  • Dynamic random matching
  • Search

Cite this