TY  - JOUR
AU  - Levitt,Steven D.
AU  - Syverson,Chad
TI  - Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11053
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11053
L1  - http://www.nber.org/papers/w11053.pdf
N1  - Author contact info:
Steven D. Levitt
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL  60637
Tel: 773/834-1862
Fax: 773/702-8490
E-Mail: slevitt@midway.uchicago.edu

Chad Syverson
University of Chicago
Booth School of Business
5807 S. Woodlawn Ave.
Chicago, IL  60637
Tel: 773/702-7815
Fax: 773/702-8490
E-Mail: chad.syverson@chicagobooth.edu
M2  - featured in NBER digest on 2005-03-01
AB  - Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real-estate agents, who know much more about the housing market than the typical homeowner, are one example. Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home. In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best. Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics. Situations in which the agent's informational advantage is larger lead to even greater distortions.
ER  -