Tour detour: Intermediaries’ search diversion in rental markets

This paper investigates how intermediaries with information advantages divert consumers’ search in rental markets and lead to inefficient outcomes. Using unique data on tenants’ initial preferences, property-showing sequences, and transaction records, we find that agents present suboptimal properties as the first option in property-showing sequences. Leveraging such door-in-the-face tactics, agents further guide tenants’ choices through sequential adjustments. These diversion strategies are robust to exogenous shocks, market variations, and platform externalities. Such search diversion is a dominant strategy through which intermediaries benefit from an increasing transaction success rate, and transaction acceleration and increased transaction prices of suboptimal properties. However, search diversion leads to rental contracts offering unsatisfactory prices and quality, resulting in perceived utility losses for the diverted tenants, subjecting tenants to discrimination.