The Impact of E-commerce on the Real Estate Industry: Baen and Guttery Revisited Executive Summary. One widely reported prediction is that the emergence of the web as an open medium for commerce threatens the role of the real estate agent as a market intermediary. In their 1997 article, for example, Baen and Guttery predicted that the increased use of the Internet and information technology would lead to a downsizing of the entire industry. However, recent Bureau of Labor Statistics data show that the real estate industry, like most of the economy in the United States, experienced steady growth during the last few years. This article revisits the issue of disintermediation in the context of the real estate industry. It discusses—from a theoretical and conceptual perspective—several reasons why the predicted downsizing did not occur. The analysis suggests that the Internet, though clearly a very powerful tool with strategic implications, may not be as disruptive a technology as originally predicted.

* Ohio State University, Columbus, OH 43210-1144 or [email protected]. ** Ohio State University, Columbus, OH 43210-1144 or [email protected].

by Waleed A. Muhanna* James R. Wolf**

Introduction In The Coming Downsizing of Real Estate: The Implications of Technology, Baen and Guttery (1997) examine the potential impact of the Internet and other information technology on the residential real estate industry. They predicted a continued rise in that the number of buyers and sellers using the Internet to find real estate-related information. A recent study by the National Association of Realtors (NAR) (1999) confirms these predictions: 37% of all potential homebuyers searched for a home online in 1999, up from just 2% in 1995. Baen and Guttery also correctly anticipated that the Internet will give users access to an unprecedented array of information traditionally held by sales agents. Today, websites such as Yahoo!Real Estate, MSN’s HomeAdvisor.com, HomeSeekers. com, Homestore.com, the NAR’s official website Realtor.com and several others provide visitors with a breadth of information, including data on recent house sales and prices of comparable houses, information on neighborhoods, schools, taxes, costs of living, and maps and tools for locating, buying, financing and insuring a home. Using a transaction cost argument, however, Baen and Guttery (1997) predicted that increased use of the Internet and information technology would have a dramatic and negative impact on the real estate industry in terms of both income and employment levels. They argued that buyers and sellers with access to information available via the Internet will have no need for traditional ‘‘infomediaries’’ and that several other players in real Journal of Real Estate Portfolio Management

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estate support positions will also be disintermediated by the Internet. The authors predicted job losses in sectors directly related to real estate, including sales agents and developers, as well as sectors involved in the support of real estate transaction such as legal services and banking. They argued that ‘‘the real estate property and mortgage markets, together with all supporting professions and service providers, are experiencing a paradigm shift that will have major implications in levels of employment and compensation,’’ (p. 1). Later adding that ‘‘there will be a tremendous cost to the real estate profession in terms of income, and therefore employment,’’ (p. 15). To date, for most of the real estate industry, Baen and Guttery’s (1997) predictions of reductions in employment and income have not materialized. In fact, in the four years since the article’s publication, the real estate industry in the United States, like much of the U.S. economy, has experienced steady growth. Of the sectors examined by Baen and Guttery, this study uses data from the U.S. Bureau of Labor Statistics (BLS) and finds that only select sectors of the banking industry have experienced any job loss, and that most of the categories examined have experienced steady growth during the last decade, even after adjusting for population growth. Further, the published results of REALTOR Magazine’s (www.realtormag.com) annual compensation surveys of NAR members suggest a steady rise in the median income of real estate practitioners from $33,600 in 1995 to $38,300 in 1996, to $43,400 in 1998, $48,750 in 1999, and $50,000 in 2000. Another prediction that has not materialized, despite the growing number of Internet real estate sites and the unprecedented amount of free information available to home buyers and sellers, is the belief by many that advances in information technology, specifically the rise of the Internet, will encourage ‘‘for sale by owner’’ (FSBO) sales, which—according to industry statistics—historically account for 16% to 20% of the market, with higher percentages in hot sellers’ markets. However, recent NAR (2001a, 2002) studies in fact found the opposite to be true: FSBOs in 1997 stood at 18% of the market but slipped to 16% in 1999 142

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and 13% in 2001 as sales continued to rise. Moreover, the once crowded field of the online real estate sector has considerably thinned out as a result of consolidation and closings. At the top of the list of up-starts that failed are e-brokerage companies such as Owners.com, which merged with Homebytes.com in October 2000 and whose primary business model sought to bypass the traditional broker by catering to the FSBO market. The list of survivors is made up of online companies (e.g., homestore.com) that sought to fully embraced the real estate agent rather than cut out the agent as a middleman. This study revisits the issue of disintermediation in the context of the real estate brokerage industry. Drawing on different bodies of knowledge and frameworks, the study explores—from a theoretical and conceptual viewpoint—several reasons why the predicted downsizing did not occur, and offers a different assessment of the likely impact of the Internet on the real estate brokerage industry. The analysis and synthesis are aimed at improving our understanding of the potential impact of the Internet on the real estate industry. It also explains—at least in part—the recent shakeout in the online real estate sector, and this can help create a roadmap for real estate professionals going forward. The remainder of the article is arranged as follows. In the next section Baen and Guttery’s (1997) predictions concerning the banking industry are revisited. The following section examines more closely the real estate brokerage sector, which has generally experienced growth contrary to Baen and Guttery’s predictions, and discusses four primary reasons why disintermediation of traditional agents is not likely to be prevalent. The final section is the conclusion.

Employment in the Banking Industry Employment statistics for the banking industry have been mixed at best. As depicted in Exhibit 1, the mortgage banking sector experienced job gains from 1996 to 1999, but lost jobs in 2000. (The exhibit also shows the employment numbers after adjusting for population growth, using 1979 as the

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Exhibit 1 Number of Mortgage Bankers (SIC 616) (‘000) 1800 1700 1600 1500 1400 1300

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base year.) Another banking sector that has experienced job losses in recent years is commercial banking and federal saving institutions. Baen and Guttery (1997) reported that the sector employed slightly more than 1.6 million workers in 1996. In 2000, after two years of job losses, the sector employed approximately thirty thousand fewer workers (Exhibit 2). However, the decline began years before the emergence of the Internet as a viable medium for commerce. This sector has witnessed a steady erosion of jobs over the previous decade. The job losses seem to stem more from changes in

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laws governing lending institutions and other factors such as consolidation and increased competition from non-banking institutions offering similar services, than from the rise and diffusion of the Internet. Holland and Westwood (2001) note that from 1950 to the 1980s, bank markets were heavily regulated and this regulation protected banks from any form of external competition. They note that these protective regulations caused the industry to lag behind others in terms of several competitive factors

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Exhibit 3 Total Real Estate (SIC 65) Employment (‘000) 1600 1500 1400 1300 1200 1100 1000

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and that the overall profitability of banks has declined for the past twenty years. They explain that the easing of regulations has blurred the boundaries between banking and other industries, destabilized the market and allowed new aggressive entrants from other industries to enter. However, while perhaps not responsible for recent job losses, the Internet, and Information Technology (IT) in general, are having an impact on the banking industry. Holland and Westwood write that IT is the most important single factor changing the banking industry, and that successful banks are using the Internet and other information technologies to attract customers and build their brands. However, they also note that technology makes it easier for non-banking institutions to enter and compete in the market. Perhaps the reason that retail banking and real estate employment numbers have moved in different directions is related to the nature of each product. Banking services appear to differ from real estate in that consumers generally view banking as more of a commodity. Timewell and Young (1999) observe that because of low switching costs in the banking industry, consumers are ‘‘cherry-picking’’ among financial institutions. If customers do not like the rates or services of one bank, they simply switch to one more to their liking, and the Internet

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makes it easier for consumers to do comparison shopping.

The Real Estate Industry Four years after the publication of Baen and Guttery (1997), the real estate industry, along with the rest of the U.S. economy, generally experienced steady job growth (see Exhibits 3 and 4). In 1996, the BLS reported just fewer than 660 thousand workers were employed as real estate agents and managers. In 2000, that number, while slightly down from 1999 (more likely on account of the slowing economy), had grown to 745,000 (Exhibit 5). Adjusted for population growth, using 1979 as the base year, this represents about a 9.2% real increase in total employment from 557,000 in 1996 to 608,000 in 2000. The BLS also reports slightly fewer than 114,000 workers employed as real estate developers and subdividers in 1996. By 2000, that number had grown to 128,500 (Exhibit 6). Adjusted for population growth, this represents a 9.1% real increase. Similarly workers employed in legal services grew from 927,000 to over one million during the same period (Exhibit 7), amounting to 5% real growth. There maybe several factors behind the fact that the predicated ‘‘downsizing of real estate’’ has not

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Exhibit 4 Total Non-Farm Employment (‘000) 140000 130000 120000 110000 100000 90000

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materialized to date. While it might be argued, the diffusion of the Internet notwithstanding, that a longer period of learning and adjustment is needed before the full impact of this technology is felt; the grim predictions are the result of a misreading of the Internet’s effect on intermediaries. In particular, it appears that characteristics inherent in the real estate product and market as well as the sales agent’s position in the value chain make disintermediation less likely to occur.

The Gatekeeper and Transaction Cost Arguments Among others, Baen and Guttery (1997) argue that the Internet’s effect on markets will be wholesale disintermediation. They foresee an electronic marketplace where intermediaries will be eliminated and end-customers will interact directly with producers. The authors note that the commissions charged by U.S. real estate agents are about double those charged in South Africa, New Zealand and the U.K. They paint the picture of an industry shaken by changes brought by technology, on the brink of ‘‘imploding’’ over internal squabbling and external pressure. Baen and Guttery (1997) assert that historically real estate agents have derived their power from the proprietary information that they controlled,

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information that is now freely available on the Internet. Noting, ‘‘Technology is transforming and transferring valuable information previously monopolized by the real estate profession into a free service,’’ (p. 4). Traditionally, only real estate professionals and other subscribers to Multiple Listing Services (MLSs) could obtain the detailed home listing information necessary to conduct a thorough home search. Baen and Guttery correctly anticipated that MLS data would soon be available over the Internet, but they incorrectly seem to assume that real estate sales professionals derive their position in the value chain from their monopoly on this listing data. To Baen and Guttery, access to listing data represented an entry barrier for the real estate market. Accordingly, they argue that once this barrier is lowered, market power would be taken from the agents and distributed among the buyers and seller. They quote Rosen (1996), ‘‘Underlying the squabbling (among agents) is the very real specter that the information-laden Internet will replace much of the public’s need for agents’ traditional house-hunting services. The fear mongers’ theory is simple: If buyers and sellers can sit at their personal computers and Macs and gather enough information about each other’s offerings—and even make offers—why should they pay an agent?’’ (p. 4). This view was also held, at least in part, by the NAR. Atkinson (2001) notes that the NAR fought to prevent MLS data from

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Exhibit 5 The Number of Real Estate Sales Agents and Managers (SIC 653) (‘000) 800 700 600 500 400

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being released over the Internet. When Microsoft attempted to make home listing data available via its website, Atkinson notes that the group fought Microsoft in court and even lobbied against the company in its antitrust battle with the U.S. government. Baen and Guttery (1997) envision a bleak future for the real estate industry where buyers and sellers involved in ‘‘cyber-tech’’ real estate transactions perform most of the tasks involved in buying and selling a home over the Internet and for the most part without real estate professionals. They predict that several players currently involved in real estate transactions will be replaced by information technology and that the sixteen participants currently required for a transaction will be pared down to four or five. Proponents of the disintermediation hypothesis draw on transaction cost theory (Williamson 1975, 1985). The theory focuses on a firm’s choice between internalizing an activity and relying on external market agents. The theory holds that firms considering the hierarchy (i.e., internalizing the function) versus market (i.e., relying on a market agent) option will behave in a cost-economizing way. The costs come primarily from two sources: production and governance costs. Production costs

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are the cost of completing the desired activity. Governance costs are the coordination and control costs involved in completing an activity. Firms choose the distribution channel (direct versus indirect through an intermediary) that minimizes the sum of both costs. Information technologies, such as the Internet, help reduce both costs, and this, it is argued, gives producers the means and incentive to sell direct, bypassing traditional market intermediaries altogether. A closer examination of transaction cost theory, however, suggests a different conclusion (Sarkar, Butler and Steinfield, 1998). By focusing exclusively on the relationship between producers and consumers, proponents of the disintermediation hypothesis overlook the effects of IT on other relationships, such as the one between the consumer and the intermediary. Sarkar et al. note that due to economies of scope and scale, channel functions can often be provided at lower costs by specialized intermediaries. The very same technology that lowers the cost of internalizing a function for a producer also lowers the cost of that function being performed by an intermediary. So, just because property sellers can potentially reach buyers directly though the Internet does not necessarily mean that either party will do away with the services of an intermediary. The intermediaries (the

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Exhibit 6 Real Estate Subdividers and Developers (SIC 655) (‘000) 160 150 140 130 120 110 100

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Exhibit 7 Legal Service Providers (SIC 81) (‘000) 1100 1000 900 800 700 600 500

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real estate agents, perhaps acting collectively) themselves can exploit the new medium to become more productive and enhance the overall efficiency of the transaction. Thus, instead of threatening intermediaries, the Internet—it can be argued—is not only sustaining but can even provide new opportunities for intermediaries. Finally, although the increased channel efficiency can put downward pressure on the commission

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rates agents are able to command, there is no evidence that this is happening so far. Also, from the consumer’s perspective, a significant reduction in transaction cost is equally likely to boost demand for real estate services, because it renders more residential moves and first-time home purchases financially affordable.1 Such an increase in the volume of real state transactions might be enough to compensate for a possible decline in average commission rate.

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The Nature of Competition in the Real Estate Industry The nature of competition in the industry may also explain the inability of many Internet real estate firms to make inroads into the home buying/selling market despite offering consumers hefty discounts. It also helps explain why the introduction of web technology is neither likely to make the real estate brokerage market fully contestable (Baumol, Panzar and Willig, 1988) nor dramatically disrupt the dynamics of competition in the industry, as many seem to suggest. Christensen (1997b:117) describes consistent patterns in the evolution of competition in all industries. He argues that, ‘‘individual products may pass through life cycles of birth, growth, maturity and demise. But product categories and brands tend to follow cycles of evolution rather than life cycles.’’ According to Christensen, the evolutionary stages are functionality, reliability, convenience and price. In each stage, companies compete and customers make their selections based on a single product attribute or a family of attributes, and this attribute or attributes constitutes the ‘‘the basis of competition in an industry.’’ In the beginning, companies compete and are compared on functionality. Over time, companies make improvements to their products until functionality exceeds the market’s need and firms can no long gain any meaningful advantage from improving functionality. At that point, the basis of competition shifts to reliability. Reliability is improved until products are considered ‘‘reliable enough,’’ after which, firms begin competing on and focusing their innovation toward convenience. Ultimately, required convenience is exceeded and the basis of competition shifts to price. The condition that drives the transition from one basis of competition to the next in an industry is ‘‘oversupply,’’ according to Christensen (1997b). If the prior basis of competition is not yet oversatisfied, a competitor who prematurely leaps to the next basis of competition is not likely to find success. Thus, it is important to consider the prevailing basis of competition when assessing the viability of a new business model in a given industry. Looking at the real estate industry, it can be argued that the industry is still in the reliability 148

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phase of competition. As such, firms attempting to compete on price, like several real estate Internet startups, are essentially going against the prevailing basis of competition and are therefore not likely to find success. As Baird and Christensen (1997, 1998) observe in the context of a preInternet startup called Studio Reality, ‘‘because of the financial riskiness of the home buying transaction, and because there is no clear, standard measures of quality and performance for homes, the home-buying market is still ensconced in the reliability stage of the evolution of competition; it is unlikely to switch rapidly to a more convenient form, as long as the reliability issues remain largely under-satisfied.’’ Individual property buyers and sellers are therefore likely to persist in choosing vendors of real estate services more on the basis of reliability (i.e., competence and trust) rather than convenience or price. The need for a reliable professional to help with a process that is viewed as knowledge-intensive and complex by most consumers, dominates any desire those consumers may have for more convenience or a better price. Real estate sales agents are therefore not likely to be disintermediated by a new medium, such as the Internet, that simply offers greater convenience and reach. Those attributes are clearly important in the mind of consumers, and the Internet can indeed enhance the overall efficiency and convenience of the process. However, in a reliability market, competence and trust trump price, and the real estate agent or firm that competes on the price dimension alone is not likely to find success (either online or offline).

Characteristics of the Residential Real Estate Product Itself Is the residential real estate product itself (a home) amenable to online buying and selling? Clearly, there are certain product characteristics that impact the suitability of a product for online commerce, but what are these characteristics or factors? Information economists (Nelson, 1970; and Darby and Karni, 1973) distinguish between three different product characteristics or qualities according to how consumers learn them: ‘‘Search qualities

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which are known before purchase, experience qualities which are known costlessly only after purchase, and credence qualities which are expensive to judge even after purchase,’’ (Darby and Karni, 1973:69) While most complex products have all three types of ‘‘qualities,’’ products may be classified into three broad categories according to which class of qualities dominates. Search goods, like most commodities and financial instruments, are products that are bought largely on the basis of ‘‘look and see’’ characteristics (e.g., price and color) that can be assessed fully based on externally provided information. Experience goods, on the other hand, need to be personally inspected or tried before purchase (e.g., buyers want to squeeze the melons, try on the garment and go for a test drive) because there is often some variance from one item to another ‘‘like’’ item. Physical products of this sort are often bought on the basis of ‘‘touch and feel’’ attributes, characteristics that a pure electronic medium such as the Internet is not generally designed to convey. The Internet therefore is more likely to threaten traditional (physical) retail channels for search goods (because direct experience is not required) than for experience goods (Lal and Sarvary, 1999). Many products also have a number of important qualities, called credence characteristics, that are difficult to determine based on casual inspection or use. Credence goods are goods for which the buyer’s decision-making is dominated by concerns about credence characteristics. These typically involve ‘‘hidden’’ attributes of a product relating to the production process and the quality of construction. Because these characteristics are ‘‘hidden,’’ there is a need for the buyer to uncover them or at least combine the claims of the seller with information about the credibility of those claims. A home is clearly a complex product that has both search, experience as well as credence qualities, and as such, it is not amenable to pure online commerce. Factors that could mitigate problems associated with experience and credence goods include developing a positive brand image, producing items of consistent and reliable quality, and offering favorable return policies and warranties. However, while these strategies might be effective in the context of brand-new, mass-produced consumer

products, they are largely inapplicable when it comes to what is in effect a ‘‘one of a kind’’ (often used) product like a home. When purchasing a home, a buyer may be able to gather information on the size of the lot and the number of bathrooms, but much of the relevant ‘‘touch and feel’’ information must be gathered in person, and checking the credibility of the seller’s claims often requires the advice and opinion of experts. Peterson, Balasubramanian and Bronnenberg (1997) examine the suitability of a product for online commerce by focusing on three other dimensions: cost and frequency of purchase, value proposition, and degree of differentiation. In terms of value proposition, Peterson et al. classify goods as either tangible physical goods or intangible information goods. As noted earlier, because information products (e.g., news, music, software) can be delivered in digital form at essentially zero cost, they are clearly more suited for online commerce. Differentiation refers to the degree sellers can set their goods apart. When producers are incapable of significant differentiation, their products are viewed as commodities and Internet-related marketing can result in extreme price competition. Since each home is unique in several ways, sellers have a wide array of options for differentiating their homes when they put it on the market. Even homes built on similar plans in the exact same neighborhood can be differentiated by several factors including landscaping, selection of wallpaper or paint, lighting and bathroom fixtures or window treatments, just to name a few. Search online for high differentiation goods is likely, particularly for higher priced items like homes. However, because homes are complex, expensive, infrequently purchased, tangible products, with significant experience and credence attributes, actual online purchase of such items is unlikely.

The Real Job of a Real Estate Agent Wigand, Crowston and Sawyer (2001) observes that there are seven distinct steps in the real estate process: listing a house, marking the listing, finding a buyer, helping a buyer select a house, negotiating a contract, removing contract contingencies and closing the sale of the house. Whether representing the buyer or the seller, the real estate Journal of Real Estate Portfolio Management

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agent plays a key role in each of these steps. The Internet may provide buyers and sellers increased real estate transaction information, but having gathered all that information most people need someone to help them sort through and interpret it. This is probably why the Internet has had little effect so far on the public’s perception of the agent’s role. An NAR study cited by Freedman (2000) shows that buyers using the Internet to search for homes actually utilize real estate agents more often than non-Internet home shoppers— 87% vs. 76%. According to that study, sellers want a real estate agent to find a buyer, sell within a time frame, set a price, negotiate with the buyer and complete the paperwork. Freedman reports that the same study found that buyers expected agents to find the right house, negotiate price, complete paperwork, calculate purchasing power and to arrange financing. The Internet can provide only some of the services mentioned above. For example, several online real estate sites and financial services and allow buyers to calculate their purchasing power and even obtain pre-approval for a home loan. The Internet also makes listing a home to a worldwide market fairly simple. However, it may be difficult for a seller to choose the best website to list their home without the help of an experienced agent. In addition, it is difficult to imagine that the tasks of negotiating with the buyer and seller or of troubleshooting the wide variety of problems that may arise could be successfully automated. When making a home purchase, typically the single most expensive investment and complex transaction for most people, buyers feel the need for a relationship with a professional real estate agent. When putting their home on the market, sellers need assistance in setting a price, marketing the property, finding a buyer and closing the sale. Real estate professionals fill the dual role of a marketing/sales agent and counselor, making it unlikely that they will be disintermediated by online services. As Wigand, Crowston and Sawyer (2001) notes, real estate sales agents use social capital—the set of social resources embedded in relationships—to establish their stake in the value chain, and that agents actively manage their social capital. This idea seems to be supported by NAR 150

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research that shows realtors’ incomes increase with experience. As realtors develop richer social networks, they are more able to exploit their networks for gain. Wigand et al. observe that real estate sales agents provide value in two ways. First by providing resources from their social network and secondly by guiding buyers and sellers through the steps required to complete a real estate transaction. It is this transaction expertise and local market knowledge along with their acquired social network, not their access to proprietary information, that we believe safeguard real estate agents from disintermediation.

Conclusion This study has revisited Baen and Guttery’s (1997) examination of technology’s effect on the real estate industry and found that, in general, their most ominous predictions of income and employment loss have not materialized. In the years since their 1997 article, the real estate industry, like most of the U.S. economy, has experienced steady growth. Specifically, more workers are now employed as real estate agents, developers and legal service providers, and that according to BLS statistics these sectors have grown in the years from 1996 to 2000. One industry mentioned by Baen and Guttery, banking, has experienced some job losses, but these losses can be attributed to a decade long trend of downsizing resulting from changes in regulation and competition from new non-bank entrants into the industry. Drawing on different bodies of knowledge and frameworks, four possible explanations were explored of why the predicted downsizing did not occur. From a transaction cost perspective, the Internet’s effect on intermediaries in the real estate market may have been misjudged by proponents of the disintermediation hypothesis. The findings indicate that certain characteristics inherent in the real estate market and the sales agent’s position in the value chain make disintermediation less likely. Specifically, real estate products are expensive, infrequently purchased, tangible, easily differentiated, experience goods with significant experience and credence attributes, and these characteristics make sales via the Internet less

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likely. The findings also indicate that the basis of competition in the real estate industry is reliability and not price, and that real estate websites competing on price alone are not likely to succeed. Finally, evidence indicates that real estate agents derive their position in the value chain, not from a monopoly on information, but from their social networks and transaction knowledge and that this factor makes Internet-enabled disintermediation less of a threat. Though more and more information relating to real estate is becoming freely available online, the Internet has not taken the complexity out of the transaction, nor will it. Given how infrequently people buy and sell homes and the complexity and size of the investment, people still want to have a licensed professional involved in the process.

competitive necessity and a potential strategic differentiator within the industry as opposed to an industry-wide threat, a technology that can be creatively leveraged to enhance the efficiency and quality of services provided by real estate practitioners in the new economy.

This is not to suggest that the Internet is not important—far from it. The web has already emerged as an important focal point for real estate information and customer interaction, and there is no question that this will have a dramatic impact on the process of marketing real estate properties and that it will result in the evolution of a new valueadded consultative role for real estate agents. However, far from being threatened by technology, a growing body of research shows that realtors have embraced both information technology and the Internet. A recent study (Muhanna, 2000) shows a dramatic rise in the number of firms using the web channel during the second and third quarter of 1999: approximately 75% of the real estate firms surveyed had established some sort of presence on the web, with another 13% indicating plans to do so by 2001. Another NAR survey (2001b) shows that 90% of its members have a computer, four in ten have a personal website and that 4% generate over 20% of their business online. The same study shows that 54% report new business generated from the Internet. The Internet allows the agent to be more productive because potential buyers are more informed. The NAR further notes that members that use technology earn more than those that do not.

References

The Internet therefore does change the real estate brokerage business fundamentally, but not in the disruptive way that many originally thought. The new medium appears to have emerged more as a

Endnotes 1. It is interesting to note that most residential moves are short-haul and for non-work-related reasons, according to a recent Census Bureau report on population mobility (www.census.gov / population / www / socdemo / migrate.html). For example, 43 million U.S. residents, or 16% of the population, moved between March 1999 and March 2000. Fiftysix percent of all moves were within the same county. Only about 20% moved to another county in the same state, and just 19% moved to a new state.

Atkinson, R. D., The Revenge of the Disintermediated (Policy Paper), Washington, DC: Progressive Policy Institute, 2001. Baen, J. S. and R. S. Guttery, The Coming Downsizing of Real Estate: The Implications of Technology, Journal of Real Estate Portfolio Management, 1997, 3:1, 1–18. Baird, B. and C. Christensen, Studio Realty, Case Study HBS 9-697-036, Boston, MA: Harvard Business School, 1997. ——., Studio Realty: Teaching Note, Case Study Teaching Note HBS 5-698-055, Boston, MA: Harvard Business School, 1998. Baumol, W. J., J. C. Panzar and R. D. Willig, Contestable Markets and the Theory of Industry Structure, New York, NY: Harcourt Brace Jovanovich, 1988. Business Wire, Onlines Go Bust, While a Traditional Brokerage Booms; Prudential California Realty Announces Record Breaking Year, in Wake of Online Brokerage Failures, Lexis-Nexis, March 05, 2001. Christensen, C., The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Boston, MA: Harvard Business School Press, 1997a. ——., Patterns in the Evolution of Product Competition, European Management Journal, 1997b, 15:2, 117–27. Darby, M. and E. Karni, Free Competition and the Optimal Amount of Fraud, Journal of Law and Economics, 1973, 16, 67–88. Freedman, R., Thumbs-Up From Buyers and Sellers, Realtormag.com, http: / / www.realtormag.com / rmomag.NSF / pages / ThumbsupfrRobArchive2000Jun, 2000. Holland, C. P. and J. B. Westwood, Product-Market and Technology: Strategies in Banking. Communications of the ACM, 2001, 44:6, 53–61. Lal, R. and M. Sarvary, When and How is the Internet Likely to Decrease Price Competition? Management Science, 1999, 18: 4, 485–503. Muhanna, W., Competing with E-Commerce in the Real Estate Brokerage Industry: An Empirical Assessment, Journal for Real Estate Practice and Education, 2000, 3:1, 1–16.

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