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Impossibility of a Competitive Equilibrium in the Real Estate Brokerage Industry

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  • Abdullah Yavas

Abstract

This note shows that the presence of fixed costs (e.g., licence fees, fees for local, state and national realtor associations, continuing education expenses, some of the office expenses, etc.) in the real estate brokerage industry makes it impossible to have competitive commission rates as the equilibrium outcome. In fact, the only pure strategy Nash equilibrium involves monopoly commission rates. This outcome compels alternative equilibrium explanations for the industry and for the future research on brokerage.

Suggested Citation

  • Abdullah Yavas, 2001. "Impossibility of a Competitive Equilibrium in the Real Estate Brokerage Industry," Journal of Real Estate Research, Taylor & Francis Journals, vol. 21(3), pages 187-200, January.
    • Handle: RePEc:taf:rjerxx:v:21:y:2001:i:3:p:187-200
    DOI: 10.1080/10835547.2001.12091051
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