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Miracle on Sixth Avenue: Information Externalities and Search

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Publication Date: December 1997

Publisher(s): Furman Center for Real Estate

Author(s): Andrew Caplin

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Social conditions (Urban conditions)

Keywords: Economic development; Neighborhoods; Affordable Housing

Type: Article

Abstract:

After a long dormant period, Lower Sixth Avenue in New York has under gone a rapid revitalisation. We show that a simple search theoretic model with information spillovers can explain both the period of underuse and the rapid turnaround. The model reduces to a simple equation, which allows us to do comparative statics on the duration of vacancies. We show how the solution reacts to changes in market structure and changes in search technology. The model is suggestive of difficulties that may occur in many markets in which there are changes over time in the optimal use of resources.