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

Andras Niedermayer and Chengsi Wang ()

International Journal of Industrial Organization, 2018, vol. 58, issue C, 214-235

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.

Keywords: Search; Dynamic random matching; Brokerage fees; Appointment principle (search for similar items in EconPapers)
JEL-codes: D82 D83 R31 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:58:y:2018:i:c:p:214-235

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International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

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