Paying Extra for a Label? Conflicts of Interest in the Housing Market

56 Pages Posted: 4 May 2020 Last revised: 23 Mar 2021

See all articles by Keyang Li

Keyang Li

University of International Business and Economics (UIBE) - School of International Trade and Economics

Jing Wu

Tsinghua University - Hang Lung Center for Real Estate; Tsinghua University - Department of Construction Management

Jianwei Xing

Peking University - National School of Development

Jubo Yan

Nanyang Technological University - School of Social Sciences

Date Written: March 23, 2020

Abstract

Intermediaries play an important role in markets with asymmetric information by reducing the 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 brokerage agents do not always help consumers reduce information asymmetry but strategically promote the units that receive the favorable taxation treatment, because these units offer higher expected commissions. The steering efforts lead to better sales performances of the labeled houses and are highly correlated with the agents’ ability and steering incentives. The buyers thus bear the welfare consequences from potential mismatch and the additional cost in acquiring the labeled units.

Keywords: Steering, Conflict of interest, Market intermediary, Housing market

JEL Classification: D83, D91, R31

Suggested Citation

Li, Keyang and Wu, Jing and Xing, Jianwei and Yan, Jubo, Paying Extra for a Label? Conflicts of Interest in the Housing Market (March 23, 2020). Available at SSRN: https://ssrn.com/abstract=3570588 or http://dx.doi.org/10.2139/ssrn.3570588

Keyang Li (Contact Author)

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Jing Wu

Tsinghua University - Hang Lung Center for Real Estate ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://thuwujing.net

Tsinghua University - Department of Construction Management ( email )

Heshanheng Building
Tsinghua University
Beijing, 100084
China

HOME PAGE: http://thuwujing.net

Jianwei Xing

Peking University - National School of Development ( email )

Beijing, 100871
China

Jubo Yan

Nanyang Technological University - School of Social Sciences ( email )

HSS 04-68, 14 Nanyang Drive
Singapore, 639798
Singapore

HOME PAGE: http://juboyan.weebly.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
64
Abstract Views
610
rank
426,585
PlumX Metrics