TY - JOUR
T1 - A search model of rental markets
T2 - Who should pay the commission?
AU - Niedermayer, Andras
AU - Wang, Chengsi
PY - 2018/5
Y1 - 2018/5
N2 - 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.
AB - 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.
KW - Appointment principle
KW - Brokerage fees
KW - Dynamic random matching
KW - Search
UR - http://www.scopus.com/inward/record.url?scp=85021812031&partnerID=8YFLogxK
U2 - 10.1016/j.ijindorg.2017.06.002
DO - 10.1016/j.ijindorg.2017.06.002
M3 - Article
AN - SCOPUS:85021812031
SN - 0167-7187
VL - 58
SP - 214
EP - 235
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
ER -