The Disciplining Effect of Concern for Referrals for Better Informed Agents: Evidence from Real Estate Transactions

Lan Shi () and Christina Tapia

No UWEC-2009-06, Working Papers from University of Washington, Department of Economics

Abstract: Using the future residence of home sellers, we compare a seller who will relocate to another state and thus will likely not provide referrals with a seller who remains in the state and thus might bring referrals. We find that moving-out-of-state sellers' residences take more days to sell than staying-in-state sellers yet without any price benefits. Moreover, among moving-out-of-state sellers, an uninformed moving-out-of-state seller's residence stays on the market for fewer days and is sold at a lower price than an informed moving-out-of-state seller. We also find that a senior seller's house sells faster and for less. We interpret these findings together as supporting that i) a concern for referrals provides discipline to both shirking and manipulation of information by agents and ii) it is important that the client be informed in protecting her own interests in one-shot transactions.

Date: 2009-02
New Economics Papers: this item is included in nep-ure
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