IDEAS home Printed from https://ideas.repec.org/p/hhs/kthrec/2024_002.html
   My bibliography  Save this paper

Door-in-the-face heuristics: Intermediaries’ diversion in rental markets

Author

Listed:
  • Fan, Ying

    (Department of Building and Real Estate, The Hong Kong Polytechnic University)

  • Fu, Yuqi

    (Department of Construction Management, Tsinghua University)

  • Yang, Zan

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

This paper investigates how intermediaries with information advantages divert consumer search in rental markets and lead to inefficient outcomes. Using unique data on tenants’ initial preferences and property-visit records, we find that intermediaries deliberately prioritize the exhibition of properties distant from tenants’ preferences in their property-showing sequences and divert the visit route toward unsolicited properties. Moreover, such diversion patterns are dynamically adjusted according to the instantaneous feedback from tenants. By using diversion strategies to affect and project consumers’ preferences and willingness to pay, intermediaries can benefit from two channels, i.e., 1) distorting transaction outcomes and achieving higher commissions and 2) facilitating deals for less-favorable properties. We also provide evidence for the successive approximations of intermediaries’ diversion strategies and their implications for tenant discrimination.

Suggested Citation

  • Fan, Ying & Fu, Yuqi & Yang, Zan, 2024. "Door-in-the-face heuristics: Intermediaries’ diversion in rental markets," Working Paper Series 24/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2024_002
    as

    Download full text from publisher

    File URL: https://kth.diva-portal.org/smash/record.jsf?pid=diva2:1836459
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    2. Ronald Rutherford & Thomas Springer & Abdullah Yavas, 2007. "Evidence of Information Asymmetries in the Market for Residential Condominiums," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 23-38, July.
    3. Hagiu, Andrei & Jullien, Bruno, 2014. "Search diversion and platform competition," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 48-60.
    4. James Albrecht & Pieter Gautier & Susan Vroman, 2016. "Directed Search in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 218-231, January.
    5. Raluca M. Ursu & Daria Dzyabura, 2020. "Retailers’ product location problem with consumer search," Quantitative Marketing and Economics (QME), Springer, vol. 18(2), pages 125-154, June.
    6. 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 1878-1898, December.
    7. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
    8. Geoffrey K. Turnbull & Bennie D. Waller & Scott A. Wentland, 2022. "Mitigating agency costs in the housing market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 829-861, September.
    9. Lu Han & Seung-Hyun Hong, 2016. "Understanding in-house transactions in the real estate brokerage industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 1057-1086, November.
    10. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
    11. Curtis R. Taylor, 1999. "Time-on-the-Market as a Sign of Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 555-578.
    12. Steven Callander, 2011. "Searching and Learning by Trial and Error," American Economic Review, American Economic Association, vol. 101(6), pages 2277-2308, October.
    13. Janssen, Loes & Fennis, Bob M. & Pruyn, Ad Th.H. & Vohs, Kathleen D., 2008. "The path of least resistance: Regulatory resource depletion and the effectiveness of social influence techniques," Journal of Business Research, Elsevier, vol. 61(10), pages 1041-1045, October.
    14. Andrei Hagiu & Bruno Jullien, 2011. "Why do intermediaries divert search?," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 337-362, June.
    15. Guo, Juncong & Qu, Xi, 2019. "Spatial interactive effects on housing prices in Shanghai and Beijing," Regional Science and Urban Economics, Elsevier, vol. 76(C), pages 147-160.
    16. Martin, Simon, 2020. "Market transparency and consumer search - Evidence from the German retail gasoline market," DICE Discussion Papers 350, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    2. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2024. "Search frictions in rental markets: Evidence from urban China," China Economic Review, Elsevier, vol. 83(C).
    3. Daisy J. Huang & Charles Ka Yui Leung & Chung-Yi Tse, 2018. "What Accounts for the Differences in Rent-Price Ratio and Turnover Rate? A Search-and-Matching Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 57(3), pages 431-475, October.
    4. Zhaohui Li & Qiang Li & Hua Sun & Li Sun, 2022. "Diffused effort, asset heterogeneity, and real estate brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(3), pages 707-742, September.
    5. Catherine Tucker & Juanjuan Zhang & Ting Zhu, 2013. "Days on market and home sales," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 337-360, June.
    6. Luis Arturo Lopez, 2021. "Asymmetric information and personal affiliations in brokered housing transactions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 459-492, June.
    7. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2023. "Search Frictions in Rental Markets: Evidence from Urban China," Working Paper Series 23/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    8. 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).
    9. Thomas J. Emmerling & Abdullah Yavas & Yildiray Yildirim, 2021. "To accept or not to accept: Optimal strategy for sellers in real estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 268-296, March.
    10. Gautier, Pieter & Siegmann, Arjen & van Vuuren, Aico, 2023. "Real-estate agent commission structure and sales performance," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 163-187.
    11. Simon Loertscher & Andras Niedermayer, 2007. "When is Seller Price Setting with Linear Fees Optimal for Intermediaries?," Department of Economics - Working Papers Series 1014, The University of Melbourne.
    12. Simon Loertscher & Andras Niedermayer, 2007. "When is Seller Price Setting with Linear Fees Optimal for Intermediaries?," Diskussionsschriften dp0706, Universitaet Bern, Departement Volkswirtschaft.
    13. Chris Cunningham & Kristopher Gerardi & Lily Shen, 2022. "The Good, the Bad, and the Ordinary: Estimating Agent Value-Added Using Real Estate Transactions," FRB Atlanta Working Paper 2022-11, Federal Reserve Bank of Atlanta.
    14. Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
    15. Matthew Cypher & S. McKay Price & Spenser Robinson & Michael J. Seiler, 2018. "Price Signals and Uncertainty in Commercial Real Estate Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 246-263, August.
    16. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    17. Panle Jia Barwick & Parag A. Pathak & Maisy Wong, 2017. "Conflicts of Interest and Steering in Residential Brokerage," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 191-222, July.
    18. Darren K. Hayunga & Henry J. Munneke, 2021. "Examining Both Sides of the Transaction: Bargaining in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 663-691, June.
    19. Seung‐Hyun Hong, 2022. "Real estate agents' influence on housing search," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(3), pages 563-582, April.
    20. Simon Loertscher & Andras Niedermayer, 2008. "Fee Setting Intermediaries: On Real Estate Agents, Stock Brokers, and Auction Houses," Discussion Papers 1472, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    Keywords

    search diversion; agent; property showing; rental markets;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:kthrec:2024_002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cecilia Hermansson (email available below). General contact details of provider: https://edirc.repec.org/data/ifkthse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.