The costs of free entry: an empirical study of real estate agents in Greater Boston

• 成果类型: Article
• 署名作者: Barwick, Panle Jia; Pathak, Parag A.
• 署名单位: National Bureau of Economic Research; Massachusetts Institute of Technology (MIT)
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12082
• 发表日期: 2015
• 页码: 103-145
• 关键词: discrete-choice models; demand; performance

摘要

This article studies the consequences of fixed commissions and low entry barriers in Greater Boston's real estate brokerage industry from 1998-2007. We find that agent entry reduces average service quality and use a dynamic empirical model to study the inefficiency in the current market structure. To accommodate a large state space, we approximate the value function using sieves and impose the Bellman equation as an equilibrium constraint. Our results suggest that a 50% cut in commissions would result in 40% fewer agents, social savings that amount to 23% of industry revenue, and 73% more transactions for the average agent.