THE WELFARE EFFECTS OF NONPRICE COMPETITION AMONG REAL-ESTATE BROKERS

This paper examines the role of brokers in economizing on transaction costs in the housing market. By lowering the cost of transactions, bro kers create welfare gains compared to a market in which buyers and sel lers transact on their own. However, if brokers engage in unproductive , non-price competition to acquire a larger share of available listing s, then some of the welfare gains are dissipated. Using a partial equi librium model, this paper shows how an excessive commission rate can l ead to this result.