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The regulation of the market for information in rental housing : a simulation study Mason, Gregory C.

Abstract

Much of the direction to recent proposals for consumer protection lies in improving the quality of pre-purchase information. As with much public policy the legislation frequently proceeds the theoretical justification. In the case of pre-purchase information the theoretical basis stems from the economics of information. The main purpose of this thesis is to examine the demand and supply of information. In particular, a demand model for information is constructed, which unlike the existing theory, assumes that the searcher is ignorant of the distribution of offers and has limited ability to store market data. The use of an error-learning simulation model permits the study of problems such as decay in the storage vector of market offers and problems due to oversearching and undersearching. It appears that the marginal rules of search are of little use in modelling the truly ignorant consumer. In addition to analyzing the demand for information, this essay investigates the supply of information. The rental housing market is used as the institutional setting. Empirical analysis of this market, along with a theory of the information broker is integrated into the demand model to create a market model for rental housing information. Finally, this model is subjected to some explorative policy tests. In dealing with consumer ignorance the government can choose to do nothing, regulate, or nationalize. The benefits, in terms of reduced search costs, are simulated and compared. A full scale cost-benefit simulation is not possible because of limited information of the costs of information production.

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