Understanding in‐house transactions in the real estate brokerage industry. (November 2016)

• Record Type: Journal Article
• Authors: Han, Lu; Hong, Seung‐Hyun
• Is Part Of: Rand journal of economics. Volume 47:Number 4(2016:Winter)
• Page Start: 1057
• Page End: 1086
• Publication Date: 2016-11
• Subjects: Industrial organization (Economic theory) -- Periodicals; Microeconomics -- Periodicals; Services publics -- Périodiques; Économie industrielle -- Périodiques; Microéconomie -- Périodiques; 338.6
• DOI: 10.1111/1756-2171.12163
• Languages: English
• ISSNs: 0741-6261

Abstract

Abstract : About 20% of residential real estate transactions in North America are in‐house transactions, for which buyers and sellers are represented by the same brokerage. We examine to what extent in‐house transactions are explained by agents' strategic incentives as opposed to matching efficiency. Using home transaction data, we find that agents are more likely to promote internal listings when they are financially rewarded and such effect becomes weaker when consumers are more aware of agents' incentives. We further develop a structural model and find that about one third of in‐house transactions are explained by agents' strategic promotion, causing significant utility loss for home buyers.