Downward Commission Rate Rigidity in the Real Estate Services Industry
نویسندگان
چکیده
A stylized fact of the real estate market is that sales commission rates are extremely rigid. Earlier research has explained this rigidity by postulating either collusive behavior or barriers to entry. This paper shows that downward rigidity in rates is consistent with both free entry and non-cooperative agent behavior. When agent effort is unobservable, sellers do not prefer the lowest possible commission rate because such rates do not induce sufficient effort from agents. The analysis suggests that downward rigidity will occur if and only if the quasi-fixed costs of selling a house are small.
منابع مشابه
On optimal real estate commissions q
When real estate agent effort is unobservable, home sellers do not prefer the lowest possible commission rate because such a rate does not induce sufficient effort from agents. As a result, the optimal commission from the seller’s perspective exhibits downward rigidity, even if there is free entry. The analysis shows that downward rigidity will occur if and only if the quasi-fixed costs of sell...
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