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

• Autores: Panle Jia Barwick, A. Pathak
• Localización: The Rand Journal of Economics, ISSN-e 1756-2171, Vol. 46, Nº. 1, 2015, págs. 103-145
• Idioma: inglés
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• Resumen

  • 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.