Market distortions when agents are better informed
Subtitle: the value of information in real estate transactions
By: Steven D. Levitt, Chad Syverson.
Contributors: Syverson, Chad.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11053; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11053.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Real property -- Prices -- United States.; House selling -- United States.; Real estate agents -- United States.
Description: "Agents are often better informed than the clients who hire them and may exploit this informational advantage.  Real-estate agents, who know much more about the housing market than the typical homeowner, are one example.  Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly.  We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home.  In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best.  Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics.  Situations in which the agent's informational advantage is larger lead to even greater distortions"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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