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The Impact of a Multiple Listing Service

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  • Lingxiao Li
  • Abdullah Yavas

Abstract

type="main"> This article offers a theoretical investigation of the impact of a multiple listing service (MLS) and its optimal size. We study a principal-agent model of real estate brokerage with multiple agents, where the entry of new agents imposes externalities on the other agents. We solve simultaneously for the equilibrium and socially efficient levels of agents’ effort choices, the size of the MLS and the commission rate. Introducing an MLS reduces the number of agents, increases agents’ effort levels and improves total surplus. Current commission rates of 5–7% appear much higher than the competitive commission rate, leading to too many agents, too much effort by agents and a lower overall surplus. We also find that giving a greater portion of the commission to the selling agent increases effort levels, reduces the number of agents and improves total surplus.

Suggested Citation

  • Lingxiao Li & Abdullah Yavas, 2015. "The Impact of a Multiple Listing Service," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 471-506, June.
    • Handle: RePEc:bla:reesec:v:43:y:2015:i:2:p:471-506
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    File URL: http://hdl.handle.net/10.1111/1540-6229.12076
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    3. Peng Liu & Jia Xie, 2021. "Optimal Contract Design in Residential Brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 493-530, June.
    4. Marcus T. Allen & William H. Dare & Lingxiao Li, 2018. "MLS Information Sharing Intensity and Housing Market Outcomes," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 297-313, August.

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