Competition of Real Estate Agents and Housing Prices in Urban China

Housing market can be viewed as a big intelligent system which gathers various intelligent agents including the demand side, the supply side, as well as the brokerage. Real estate agents are a large group that can lubricate housing transactions, but due to the principal-agent problem, this housing-transaction intelligent system shows low service efficiency. This paper claims that the non-price competition among real estate agents could possibly reconcile the principal-agent problem. With a merged dataset of housing listings and transaction records in Beijing, we find that the competition in the brokerage market raises housing prices significantly. This provides the first empirical evidence that the non-price competition of real estate agents could reconcile the principal-agent problem. Furthermore, we find that exclusive listing and the agent's effort positively relate to higher housing prices. The impact is even stronger in a hotter market. This paper explores the role of competition in the performance of the housing-transaction intelligent system, and therefore has important theoretical and practical significance for the system.