A Theoretical and Simulation-Based Examination of Single versus Dual Agent Models in China's Housing Market
28 Pages Posted: 12 Jul 2014
Date Written: July 11, 2014
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
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