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Cartels don’t work without an enforcement mechanism to punish defectors. Otherwise you’d be crazy not to lower your rents by 10% and make it up on volume. This
by twoodfin 3y ago
Cartels don’t work without an enforcement mechanism to punish defectors. Otherwise you’d be crazy not to lower your rents by 10% and make it up on volume.
This is obviously true in many markets where price discovery is easier: Mobile network operators don’t need a service to report on their competitors’ pricing. They know it and somehow a cartel fails to form.
- _AzMoo 3y agoYou can't make it up on volume, your product isn't elastic enough. There's only so many properties that you can own, and financing right now for both construction and acquisition is incredibly difficult. The only viable way for property managers to grow at the moment is to increase their margins for the same product, which as you're likely aware, means either decreasing their costs or increasing their prices. They are doing both.
- HDThoreaun 3y agoIf they’re not withholding supply they’re not colluding. They’re just charging the market price. Cartels only work if they’re able to lower supply.
- _AzMoo 3y agoThey can lower supply by leaving units empty.
- HDThoreaun 3y agoare they?
- _AzMoo 3y agoYes they are, it's common in the industry. Source: I work for a RealPage competitor.