The Microstructure of Housing Markets. Search, Bargaining, and Brokerage
This chapter surveys the literature on the microstructure of housing markets. It considers one-sided search, random matching, and directed search models. It also examines the bargaining that takes place once a match has occurred, with the bargaining taking various forms, including two-party negotiations of different types and multiparty housing auctions. The chapter reviews research on real estate brokers as intermediaries as well, focusing on the role of brokers in the matching and bargaining process, the nature of competition and entry in the brokerage industry, and the incentive issues that are present. The chapter also considers the inefficiencies that pervade the brokerage industry and the related policy debates. These are important issues both because of the inherent importance of housing and brokerage and because of the importance of housing to macroeconomic dynamics.