Residential Real Estate Brokerage Efficiency and the Implications of Franchising: A Bayesian Approach |
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| Authors: | Danielle Lewis Randy Anderson |
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| Institution: | College of Business Administration, Southeastern Louisiana University, Hammond, LA 70402 or .;School of Business, Samford University, Birmingham, AL 35229 or . Work was completed at Northeast Louisiana University. |
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| Abstract: | This paper provides substantial evidence that real estate brokerage firms choosing to franchise are more cost-efficient than firms that remain independent. It uses 1995 cost data obtained from a nationwide survey of real estate brokerages to analyze the differences in firm efficiency across firm type—franchised and independent. We estimate a single stochastic cost frontier using Bayesian statistics and measure firm efficiency relative to that frontier conditional on firm type. The results indicate that real estate brokerages are relatively efficient, implying a competitive market, but franchised brokerages are substantially more efficient than their independent counterparts. |
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