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The Disciplining Effect of Concern for Referrals for Better Informed Agents: Evidence from Real Estate Transactions

  • Lan Shi
  • Christina Tapia
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Using the future residence of home sellers, we compare a seller who will relocate to another state and thus will likely not provide referrals with a seller who remains in the state and thus might bring referrals. We find that moving-out-of-state sellers' residences take more days to sell than staying-in-state sellers yet without any price benefits. Moreover, among moving-out-of-state sellers, an uninformed moving-out-of-state seller's residence stays on the market for fewer days and is sold at a lower price than an informed moving-out-of-state seller. We also find that a senior seller's house sells faster and for less. We interpret these findings together as supporting that i) a concern for referrals provides discipline to both shirking and manipulation of information by agents and ii) it is important that the client be informed in protecting her own interests in one-shot transactions.

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Paper provided by University of Washington, Department of Economics in its series Working Papers with number UWEC-2009-06.

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Date of creation: Feb 2009
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Handle: RePEc:udb:wpaper:uwec-2009-06
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  1. Bar-Isaac, Heski & Tadelis, Steven, 2008. "Seller Reputation," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(4), pages 273-351, August.
  2. repec:tpr:qjecon:v:118:y:2003:i:3:p:785-814 is not listed on IDEAS
  3. 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.
  4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  5. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Hubbard, Thomas N, 2002. "How Do Consumers Motivate Experts? Reputational Incentives in an Auto Repair Market," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 437-68, October.
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