A Theoretical and Simulation-Based Examination of Single versus Dual Agent Models in China's Housing Market

28 Pages Posted: 12 Jul 2014

See all articles by Yang Zhang

Yang Zhang

Beijing Forestry University

Hong Zhang

Tsinghua University

Michael Seiler

College of William and Mary - Finance

Date Written: July 11, 2014

Abstract

We present and contrast a one-agent versus a two-agent theoretical model for residential real estate brokerage consideration in China’s housing market. We then perform a series of simulations using values present in the Chinese marketplace to identify which system should prevail in terms of degree of commission incentive, agent’s search effort and buyer’s utility. We find that in the one-agent model, the search effort of the agent is greater, the buyer’s commission incentive is lesser, and the buyer’s utility is greater. Therefore, a rational buyer will choose to entrust a buying and selling agent instead of only using a buyer’s agent.

Keywords: residential brokerage, buyer’s agent, seller’s agent, principal-agent theory, China

JEL Classification: C1, D1

Suggested Citation

Zhang, Yang and Zhang, Hong and Seiler, Michael, A Theoretical and Simulation-Based Examination of Single versus Dual Agent Models in China's Housing Market (July 11, 2014). Available at SSRN: https://ssrn.com/abstract=2465124 or http://dx.doi.org/10.2139/ssrn.2465124

Yang Zhang

Beijing Forestry University ( email )

35 Qinghua E Rd.
WuDaoKou
Beijing, Haidian Qu 100085
China

Hong Zhang

Tsinghua University ( email )

Beijing, 100084
China

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

VA
United States

HOME PAGE: http://mason.wm.edu/faculty/directory/seiler_m.php

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