Assessing the Performance of Simple Contracts Empirically:The Case of Percentage Fees

Simon Loertscher & Andras Niedermayer
Authors registered in the RePEc Author Service: Andras F. Niedermayer and Simon Loertscher

No 1163, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper estimates the cost of using simple percentage fees rather than the broker optimal Bayesian mechanism, using data for real estate transactions in Boston in the mid-1990s. This counterfactual analysis shows that interme-diaries using the best percentage fee mechanisms with fees ranging from 5.4% to 7.4% achieve 85% or more of the maximum profit. With the empirically observed 6% fees intermediaries achieve at least 83% of the maximum profit and with an optimally structured linear fee, they achieve 98% or more of the maximum profit.

Keywords: brokers; simple mechanisms; percentage fees; real estate brokerage (search for similar items in EconPapers)
JEL-codes: C72 C78 L13 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Assessing the Performance of Simple Contracts Empirically: The Case of Percentage Fees (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1163

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