Steering in the Housing Market: Incentive induced by the tax scheme
43 Pages Posted: 4 May 2020 Last revised: 2 Aug 2023
Date Written: March 23, 2020
Intermediaries play an important role in markets with asymmetric information by reducing search friction and uncertainty for buyers and sellers. However, when a conflict of interest arises, agents may not fully act on behalf of their clients. Using a unique dataset of both housing resale transactions and agent showing records from a major brokerage firm, we document the brokerage agents’ steering behaviors induced by the differential treatment of certain housing units under the taxation scheme in China. Our results show that brokerage agents strategically promote the units that receive more favorable tax treatment because these units offer higher expected commissions. The steering efforts lead to better sales performances of the promoted houses and are highly correlated with the agents’ ability and steering incentives. Buyers’ viewing and purchasing decisions are significantly affected by agents’ steering.
Keywords: Steering, Conflict of interest, Market intermediary, Housing market
JEL Classification: D83, D91, R31
Suggested Citation: Suggested Citation