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Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions

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Author Info
Steven D. Levitt (University of Chicago, NBER, and American Bar Foundation)
Chad Syverson (University of Chicago and NBER)

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Abstract

Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real estate agents have an incentive to convince 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 to when an agent sells his own home. Consistent with the theory, we find homes owned by real estate agents sell for 3.7% more than other houses and stay on the market 9.5 days longer, controlling for observables. Greater information asymmetry leads to larger distortions. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Publisher Info
Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 4 (08)
Pages: 599-611
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Handle: RePEc:tpr:restat:v:90:y:2008:i:4:p:599-611

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2007. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," NBER Working Papers 13360, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Simon Loertscher & Andras Niedermayer, 2007. "When is Seller Price Setting with Linear Fees Optimal for Intermediaries?," Diskussionsschriften dp0706, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
    Other versions:
  3. B. Douglas Bernheim & Jonathan Meer, 2008. "How Much Value Do Real Estate Brokers Add? A Case Study," NBER Working Papers 13796, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Paul E. Carrillo, 2005. "Assessing the Value of On-line Information Using a Two-sided Equilibrium Search Model in the Real Estate Market," Computing in Economics and Finance 2005 307, Society for Computational Economics. [Downloadable!]
  5. Christopher C. Afendulis & Daniel P. Kessler, 2006. "Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care," NBER Working Papers 12623, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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