Strategic Pricing in the Housing Market - Can Real-Estate Brokers Influence the Market Price?

Most properties in Norway are sold through a real-estate broker, and it is the seller who hires the broker to carry out the sale. In later years the number of real-estate brokers in Norway has grown, so the competition among them has become fierce. The competition has been on both price and quality. When competing on quality, the main problem for the brokers is to find the most efficient signals. Various signals are used, for example: The individual brokerís qualifications, conspicuous marketing of properties and claims of ability to obtain higher selling prices than other brokers. The signal of ability to obtain a high selling price is the individual brokerís stipulation of asking price as an estimate of expected price. A common way of selecting which broker to hire is to let brokers reveal their individual estimate of the selling price and then choose the broker revealing the highest. This paper investigates the ability of real estate brokers to influence the selling price. The hypothesis that will be tried falsified is that some brokers are able to obtain higher than overall expected prices. The alternative is that the market operates efficient, which means that sellers using brokers stipulating a higher than expected selling price, will experience a longer time on market for their property and at the end obtain the expected price. The hypothesis is refuted and the alternative is accepted as expected by theory.