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Residential Real Estate Brokerage Efficiency from a Cost and Profit PerspectiveRandy I. AndersonCity University of New York, CUNY Baruch College - Zicklin School of Business - Department of Economics and Finance Danielle LewisSoutheastern Louisiana University - College of Business Administration Leonard V. ZumpanoUniversity of Alabama - Department of Economics, Finance and Legal Studies The Journal of Real Estate Finance and Economics, Vol. 20, No. 3 2000 Abstract: Using 1994-1995 microeconomic data from the National Association of Realtors (NAR), this paper estimates cost and profit X-efficiency levels in the residential real estate brokerage market using traditional and Bayesian stochastic frontier models. We find that firms err more from failure to maximize profits than from failure to minimize costs. To determine what characteristics influence efficiency, we perform a regression analysis. The results show that franchising and firm age are associated with increases in efficiency, while MLS affiliation and producing a balanced output of listings and sales decrease performance. Finally, we estimate economies of scale and find compelling evidence that firms are operating at increasing returns to scale.
JEL Classification: L85, R21, R29 Accepted Paper SeriesDate posted: November 1, 1999Suggested CitationContact Information
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