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Steering in the housing market: Incentive induced by the tax scheme

Author

Listed:
  • Li, Keyang
  • Wu, Jing
  • Xing, Jianwei
  • Yan, Jubo

Abstract

Intermediaries play an important role in markets with asymmetric information by reducing search friction and uncertainty for buyers and sellers. However, when a conflict of interest arises, agents may not fully act on behalf of their clients. Using a unique dataset of both housing resale transactions and agent showing records from a major brokerage firm, we document the brokerage agents' steering behaviors induced by the differential treatment of certain housing units under the taxation scheme in China. Our results show that brokerage agents strategically promote the units that receive more favorable tax treatment because these units offer higher expected commissions. The steering efforts lead to better sales performances of the promoted houses and are highly correlated with the agents' ability and steering incentives. Buyers' viewing and purchasing decisions are significantly affected by agents’ steering.

Suggested Citation

  • Li, Keyang & Wu, Jing & Xing, Jianwei & Yan, Jubo, 2023. "Steering in the housing market: Incentive induced by the tax scheme," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:regeco:v:103:y:2023:i:c:s0166046223000881
    DOI: 10.1016/j.regsciurbeco.2023.103953
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    More about this item

    Keywords

    Steering; Conflict of interest; Market intermediary; Housing market;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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