Real Estate Brokers and Commission: Theory and Calibrations

Oz Shy

The Journal of Real Estate Finance and Economics, 2012, vol. 45, issue 4, 982-1004

Abstract: This paper has two goals: (a) To model an inherent conflict of interest between a seller of a house and the real estate broker hired by the seller. In this environment, the pressure brokers exert on sellers to reduce prices generates faster sales and hence reduces sellers’ expected profit. (b) To calibrate the brokers’ commission rates that would maximize sellers’ expected gain. The calibration results may hint whether the ongoing uniform commission rate reflects collusion among real estate agencies, or should be viewed as competitive. Copyright Springer Science+Business Media, LLC 2012

Keywords: Real estate brokers; Selling a house; Conflict of interest; Middleman; Commission; Price fixing; Loss aversion; L85 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Real estate brokers and commission: theory and calibrations (2009)
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DOI: 10.1007/s11146-010-9296-6

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