Miracle on Sixth Avenue: Information Externalities and Search
Publication Date: December 1997
Publisher(s): Furman Center for Real Estate
Author(s): Andrew Caplin
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Economic development; Neighborhoods; Affordable Housing
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.