The Impact of a Multiple Listing Service

Real Estate Economics, Forthcoming

Posted: 2 Oct 2013

See all articles by Lingxiao Li

Lingxiao Li

Longwood University

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 26, 2013

Abstract

This paper offers a theoretical investigation of the impact of a multiple listing service (MLS) and its optimal size. We study a principal-agent model of real estate brokerage with multiple agents, where the entry of new agents imposes externalities on the other agents. We solve simultaneously for the equilibrium and socially efficient levels of agents’ effort choices, the size of the MLS, and the commission rate. Introducing an MLS reduces the number of agents, increases agents’ effort levels, and improves total surplus. Current commission rates of 5%-7% appear much higher than the competitive commission rate, leading to too many agents, too much effort by agents, and a lower overall surplus. We also find that giving a greater portion of the commission to the selling agent increases effort levels, reduces the number of agents and improves total surplus.

Keywords: optimal MLS size, optimal commission rate, brokerage

Suggested Citation

Li, Lingxiao and Yavas, Abdullah, The Impact of a Multiple Listing Service (September 26, 2013). Real Estate Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2334854

Lingxiao Li

Longwood University ( email )

Farmville, VA
United States

Abdullah Yavas (Contact Author)

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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