Residential Real Estate Brokerage Efficiency from a Cost and Profit Perspective |
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Authors: | Randy I. Anderson Danielle Lewis Leonard V. Zumpano |
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Affiliation: | (1) School of Business, Samford University, 800 Lakeshore Drive, Birmingham, AL, 35229;(2) Department of General Business, College of Business Administration, Southeastern Louisiana University, Hammond, LA, 70402;(3) Economics, Finance, and Legal Studies, College of Commerce and Business Administration, The University of Alabama, Tuscaloosa, AL, 35487-0224 |
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Abstract: | Using 1994–1995 microeconomic data from the National Association of Realtors (NAR), this article 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. |
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Keywords: | real estate brokerage X-efficiency economies of scale |
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