A Economist’s Response

Seth Gitter has answered my call for an economist here. Check out this post, and the rest of his blog for all you budding economists out there. 

To continue along with what I feel is unrational economic behavior, there is a house for rent in Heredia. My friends used to live there, paying $500 a month. It’s in a middle-class neighborhood, off a main road and is extremely dusty, noisy and cramped. This particular house has three bedrooms, 2.5 baths and a small back yard. 

My friends left because the owners increased the rent to $800 a month. To put this in perspective, the average urban-dwelling Costa Rican family earns around $700 a month. After the rent increase, almost a year ago, the house has only had a tenant for two months. The rest of the time, including right now, it has sat vacant, producing no income for its owners. Why would the owners eschew a sure thing at $500 or $600 a month for the hope of generating slightly more income with an above-market-value monthly rent? Why would they prefer to leave their home to the elements instead of using it to produce income, which is its ostensible purpose? 

I can only offer a couple of unsubstantiated ideas. One, the owners don’t need the money. Perhaps the house has been paid for, and they don’t want to bother with tenants unless the price is right. Or, it’s a pride issue. The owners might be thinking, I’ve put a lot of money into this house, and I refuse to rent it for less than I think it’s worth. 

What do you think?


2 Responses to “A Economist’s Response”

  1. Sarah Says:

    Maybe they are proud people in that they don’t want to rent the place to a bunch of “rich” gringos ( assuming your friends living there were gringos) and let them get a deal on the place. They probably never expected the renters to leave. It’s one of those ‘cut off your nose to spite your face’ scenarios.

  2. Nate Says:

    Maybe they were in the back of the class playing grabass during the 9am-10am school hours and missed the lecture on arithmetic?

    Or maybe they’re the type of classy people who will only rent out to other really classy people. They just bide their time, waiting for that Tico Kato Kaelin to come around…

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