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Buyer Brokerage: Incentive and Efficiency Implications

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  • Yavas, Abdullah
  • Colwell, Peter

Abstract

This article examines the incentive and efficiency implications of buyer brokerage. We show that it is possible to perfectly align the interests of the seller with those of his agent and the interests of the buyer with those of his agent. Furthermore, effort levels can be efficient. This result is a departure from earlier conclusions in the literature that the agent's effort level can neither be perfectly aligned with the principal's interests nor be efficient. The departure is primarily due to the feature of our model that it recognizes the costs as well as the benefits of an agent's effort to her principal, and vice versa. Finally, we discuss the implications of buyer brokerage for the future of MLS services. Copyright 1999 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

Volume (Year): 18 (1999)
Issue (Month): 3 (May)
Pages: 259-77

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Handle: RePEc:kap:jrefec:v:18:y:1999:i:3:p:259-77

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Web page: http://www.springerlink.com/link.asp?id=102945

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Cited by:
  1. Arnott, R. & Anglin, P., 1995. "Are Brokers' Commission Rates on Home Sales Too High? A Conceptual Analysis," G.R.E.Q.A.M., Universite Aix-Marseille III 95a21, Universite Aix-Marseille III.
  2. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, vol. 99(5), pages 1878-98, December.
  3. Sahin, M. Abdullah & Sirmans, C.F. & Yavas, Abdullah, 2013. "Buyer brokerage: Experimental evidence," Journal of Housing Economics, Elsevier, Elsevier, vol. 22(4), pages 265-277.
  4. Lynn Fisher & Abdullah Yavas, 2010. "A Case for Percentage Commission Contracts: The Impact of a “Race” Among Agents," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 40(1), pages 1-13, January.
  5. Thomas J. Miceli & Katherine A. Pancak & C. F. Sirmans, 2006. "Is the Compensation Model for Real Estate Brokers Obsolete?," Working papers 2006-23, University of Connecticut, Department of Economics.

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