Market Power and Consumer Welfare: Evidence from Home Rental Markets

47 Pages Posted: 28 Jun 2019

See all articles by Steven Chong Xiao

Steven Chong Xiao

University of Texas at Dallas - Naveen Jindal School of Management

Serena Wenjing Xiao

University of Texas at Dallas

Date Written: May 26, 2019

Abstract

This paper examines the recent rise of institutional investment in the single-family home-rental market and its implication to renters' welfare. Using institutional mergers to identify local exogenous variation in corporate landlords' market power, we show that rent increased in neighborhoods where both of the merging firms owned properties (i.e. overlapping neighborhoods) relative to other non-overlapping neighborhoods. Interestingly, crime rate also decreased significantly in the overlapping neighborhoods after mergers. Our findings suggest that while corporate landlords leverage market power to extract greater surplus from renters, they also improve the quality of rental service by internalizing the cost of public goods.

Keywords: Real Estate, Home Rental, Institutional Investor, Market Power, Horizontal Merger

JEL Classification: G20, R30

Suggested Citation

Xiao, Steven Chong and Xiao, Serena Wenjing, Market Power and Consumer Welfare: Evidence from Home Rental Markets (May 26, 2019). Available at SSRN: https://ssrn.com/abstract=3410281 or http://dx.doi.org/10.2139/ssrn.3410281

Steven Chong Xiao (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Serena Wenjing Xiao

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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