A MODEL OF REPUTATION ACQUISITION IN REAL-ESTATE BROKERAGE

This paper investigates the role of reputation in the context of the r eal estate brokerage market. We develop a dynamic partial-equilibrium model of the brokerage firm in which we are able to characterize how t he reputation and market value of a brokerage firm evolve over time. O ur model highlights the incentives for acquiring reputation and shows how reputation affects the market value of the brokerage firm. We use this model to study the dynamic response of a brokerage firm to change s in commission rates, external costs, interest rates, and the persist ence Of reputation. (C) 1996 Academic Press, Inc.