ON THE WEST-GERMAN TENANTS PROTECTION LEGISLATION - A COMMENT

Borsch-Supan [1986] shows that eviction control in a rental housing ma rket may be Pareto-improving due to incomplete information. In the pre sent comment it is shown that this result is crucially dependent on th e assumption that the agents are not permitted to voluntarily agree on a prolongation of the contract once the information is revealed. A si depayment is introduced into Borsch-Supan's model which the tenant may pay to the landlord in order to avoid eviction. With this modificatio n, competitive equilibria are shown to exist and to be efficient.