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The Effect of Reputation and Competition on the Advice of Real Estate Agents

Posted: 22 Aug 2008  

Hilde Patron

State University of West Georgia

Kenneth Roskelley

Mississippi State University - Department of Finance & Economics

Date Written: August, 21 2008

Abstract

We study a two-period bargaining game where buyers and sellers employ real estate agents to help them determine the sales price of a house. We find that agents are less likely to provide aggressive bargaining advice to their client when they receive percentage commissions and when they work for the buyer. In addition, we find that agents are less likely to suggest aggressive bargaining strategies when there is little market competition, the gains to trade are large, in markets where housing values appreciate slowly, and when dual agency is permitted. More importantly, we show that an agent is more likely to bargain aggressively and capture a portion of the gains to trade for a client when the house's sales price is closely related to the agent's reputation and future business (referrals).

Keywords: bargaining game, real estate agent, reputation

Suggested Citation

Patron, Hilde and Roskelley, Kenneth, The Effect of Reputation and Competition on the Advice of Real Estate Agents (August, 21 2008). Journal of Real Estate Finance and Economics, Vol. 37, No. 4, 2008. Available at SSRN: https://ssrn.com/abstract=1245183

Hilde Patron

State University of West Georgia ( email )

1601 Maple St
Carrollton, GA 30118-3030
United States

Kenneth Roskelley (Contact Author)

Mississippi State University - Department of Finance & Economics ( email )

Mississippi State, MS 39762
United States
662-325-1979 (Phone)

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