The Impact of a Multiple Listing Service

36 Pages Posted: 19 May 2015

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: Summer 2015

Abstract

This article 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.

Suggested Citation

Li, Lingxiao and Yavas, Abdullah, The Impact of a Multiple Listing Service (Summer 2015). Real Estate Economics, Vol. 43, Issue 2, pp. 471-506, 2015. Available at SSRN: https://ssrn.com/abstract=2607753 or http://dx.doi.org/10.1111/1540-6229.12076

Lingxiao Li (Contact Author)

Longwood University ( email )

Farmville, VA
United States

Abdullah Yavas

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
265
PlumX Metrics