Nature of Competition: Space Rental

 

For a starter, we quote from a super-popular textbook as regards the rental of the living site, say, in the City of London, for the coming couple of years.

Gregory Mankiw, 2012, p.115

Believe it or not, the supply is constant (irrelevant or “exogenous”) all through from the short moving season to the long year of national income accounting. According to the author, the supply is “fixed.”

             On the sidewalk, don’t get us wrong: A moment (T⁰) is irrelevant as regards an organism such as the rental market. Or equivalently, a stock (T⁰) is dead at each and every moment and is no less far away from the market than the Eternity is from us living particularly in “the short run.”

             Fixed? why, where, when, for what, to whom, and how? We say “at the moment” only to mean “in a shorter run than the short run.” There is no such thing in the first place on Earth as a moment (T⁰), which is proprietary to Eternity (T⁰). “Wise men say only fools rush in” on one hand, while keeping hands on “the moment” on the other hand.

             Please hands off “the moment,” or RIP!

             Has any of us, a macroeconomist or otherwise, ever seen the non-existent (0) in real quantity? Have we ever seen Gregory in name only, exogenous to pieces of paper?

             How real is any of us without a shadow?

Space to a site. We need space before we do something. As usual in the market of any type, we as the first marginal step define the unit of trade in the rental right of space. In the practice, the tradable space always comes with some facilities. As such, we imagine a rentable site of a defined size with standard facilities for a specific period of occupation as the unit of trade in the site-rental market. 

             Suppose retail-shops in a shopping mall on the Fifth Avenue of Manhattan. The rental rate would be so-and-so in the dollar bills per month (U∙m∙T^-1) up to two years hence. Let us additionally assume that the developer as realtor takes by policy the spring as the primary season of making rental contracts. In addition, the developer has many other businesses to care about. If needs be, nevertheless, the realtor may renovate shops into the mall to so many other uses or innovate more shops in the same mall and nearby for the purpose of lending.   

The demand curve. Please refer to the diagram except that the rental rate would be more professional than “rental price,” may it be “less honest intellectually” (cf. "Who was Milton Friedman").             

The supply curve. Where there are demanders, there are evacuators. As the mirror image of the demand curve or otherwise, the supply curve slops upward.

             Where is “the fixed”? Well, everything in Eternity is always and everywhere fixed (T⁰). The time therein never lapses over but it flies all across (L^-1) the RIPs of different kinds and degrees.

End note. To be precise, a unit of apartment is closer to a durable power than to a site. The former is demanded for the final service, while the latter for occupancy for creative activities of various kinds. It can possibly be regarded as a soil power which we discuss later. 

Eppur si muove. In every spring, at any rate, so many rental rights turn over in the market. At higher rental, more choose to evacuate while less to rent and vice versa. When the rate goes too high up, there may even be premature evacuators who choose to pay commuting costs over the incremental rate. In practice, they will pay a small penalty as a type of transaction cost which we usually abstract away.

             On the supply side, the developer is "Free to Choose"" to close old units or open new units. In the meantime, some renters might be interested in multiple units.

 

 Déjà vu, we have heard of the Whole Story earlier. In the rental market, the only “fixed” is “variable.” 

Strauss: Die Frau ohne Schatten – Sinfonische