Thomas J. Miceli

The Optimal Duration of Real Estate Listing Contracts

The length of the real estate listing contract is examined as a means of providing an incentive for brokers to act in the best interest of home sellers. A limitation on the duration of the contract accomplishes this objective by imposing a cost (namely, the foregone commission) on brokers who fail to complete a sale before the contract expires. The sellers optimal contract duration balances the benefits of improved incentives against the expected cost of renegotiating a new contract in the event of a failure bv the broker. Copyright American Real Estate and Urban Economics Association.

Do Owners Take Better Care of Their Housing Than Renters

According to conventional wisdom, homeowners take better care of their housing than do renters, as a result of the rental externality. We argue that two forms of homeowner externality ootentially create similar incentives for owners to undermaintain their housing. The first is due to the inability of prospective buyers to fully observe past seller maintenance, and the second is a result of the limited liability of borrowers in the event of mortgage default. Empirical analysis verifies the existence of the mortgage externality, but we find no evidence for the resale externality. Copyright American Real Estate and Urban Economics Association.

Contracting with spatial externalities and agency problems The case of retail leases

Abstract This paper examines leasing arrangements between a shopping center landlord/developer and individual stores in the presence of inter-store shopping externalities. The problem is to design individual leases so that (i) stores internalize inter-store externalities, and (ii) the landlord does not underprovide marketing effort that is beneficial to all stores. We show that the key element for achieving these goals is the ability of the landlord to cancel the leases of stores whose sales fail to achieve a target level. Such cancellation, or ‘recapture’, clauses are common in commercial leases. We also show that in the absence of such a clause, familiar types of commercial leases fail to achieve the above objectives.

An Experimental Analysis of the Impact of Intermediaries on the Outcome of Bargaining Games

We conduct an experimental analysis of the bargaining between a buyer and a seller of the exchange of a single good by means of an intermediary or broker. We examine how an intermediary affects the price, the likelihood of a successful negotiation, and the time it takes to complete a negotiation. We first examine the impact of the intermediary as a pure middleman, and then as an information source about the distribution of seller and buyer reservation prices. The results show that an intermediary, whether or not informed, increases the sale price, reduces the likelihood of an agreement, and increases the time to reach an agreement (though the number of bargaining rounds declines). The results suggest that the benefits of brokerage may be predominantly in the matching of buyers and sellers rather than in facilitating bargaining.

A Simple Theory of Increasing Penalties for Repeat Offenders

A feature of many penal codes is that punishments are more severe for repeat offenders, yet economic models have had a hard time providing a theoretical justification for this practice. This paper offers an explanation based on the wage penalty suffered by individuals convicted of crime. While this penalty probably deters some first-timers from committing crimes, it actually hampers deterrence of repeat offenders because of their diminished employment opportunities. We show that in this setting, an escalating penalty scheme is optimal and time consistent.

Voluntary Approaches to Environmental Protection: The Role of Legislative Threats

Traditionally, policymakers have relied on legislative and regulatory restric-tions on polluters to ensure adequate protection of the environment. To a lesser extent, they have used economic incentives, such as taxes, tradeable permits, and environmental liability.1 Recently, however, attention has turned to the use of voluntary agreements between regulators and polluters as an alternative to mandatory approaches based on regulation or legislation. Voluntary agreements can be an attractive alternative to mandatory restrictions since they have the potential to reduce compliance costs by allowing greater flexibility and to reduce administrative and other transactions costs (Baggott, 1986; Goodin, 1986). Notable examples of the recent use of voluntary environmental protection agreements include the US Environmental Protection Agency’s 33/50 Program to reduce voluntarily discharges of industrial toxic pollutants (US Environmental Protection Agency, 1992) and the Dutch National Environmental Policy Plan.

Plea bargaining and deterrence: An institutional approach

Previous economic analyses of plea bargaining have largely ignored its impact on the deterrence of crime. Instead, they have focused on the bargaining between a defendant and a prosecutor once a crime has been committed. This article remedies this deficiency by asking how the practice of plea bargaining influences the determination of criminal punishment and thereby the supply of crime by rational offenders. The key question examined is, how do the ex post objectives of prosecutors affect the ability of legislatures to implement criminal punishments aimed at achieving optimal deterrence? Various prosecutorial objectives are considered in answering this question.

Title Systems and Land Values

The Torrens (or registration) and the recording title systems apply different principles to resolve conflicting claims to land title. This paper develops a theoretical model of how expected title risk and transactions costs affect land value across the two systems and ultimately concludes that the Torrens system leads to higher property values, ceteris paribus. It also suggests that empirical studies of the title system–land value nexus need to control for self‐selection effects in the data. We use the simultaneous existence of two alternative title systems in Cook County, Illinois, as a natural experiment for comparing land values under each system. The estimates indicate that the Torrens system increases land value relative to the recording system when controlling for self‐selection effects.

The Multiple Listing Service, Commission Splits, and Broker Effort

This paper examines the impact of split commissions on broker effort in MLS sales. The joint effort of brokers to find a buyer for a given listing is maximized when the broker who locates a buyer first receives the entire commission. In contrast, splitting the commission between the listing and finding broker (when they differ) maximizes the joint profits of brokers. When competition among brokers to acquire listings is considered, however, the split brokers most prefer entails a smaller (though still positive) share for the listing broker in order to reduce wasteful competition for listings. While sellers still prefer to pay only the broker who finds a buyer, brokers may not be willing to acquire and share listings under such an arrangement.

Defining Efficient Care: The Role of Income Distribution

This article examines whether the wealth levels of injurers and victims in accident cases are relevant for the determination of efficient tort rules. When the standard of efficiency is wealth maximization, it is well known that the answer is no. In this article, we consider whether this is also true when utility is not linear in wealth. We show that when actuarially fair insurance is available and income can be redistributed by mechanisms other than tort liability, efficient care levels and damage awards are independent of wealth in this case as well. When independent redistribution mechanisms do not exist, however, then whether wealth matters depends on the assumed distribution of accident costs in the definition of efficient care. These conclusions have important implications regarding the admissibility of evidence regarding a defendants wealth in tort cases.