4.4 Article

For-Sale-by-Owner Platforms and Intermediation Pricing: Evidence from a Natural Experiment

Journal

MARKETING SCIENCE
Volume -, Issue -, Pages -

Publisher

INFORMS
DOI: 10.1287/mksc.2022.0245

Keywords

digital platforms; housing market; for-sale-by-owner; natural experiment

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Intermediary agents have a crucial role in connecting sellers and buyers, but digital platforms have challenged their dominance by offering more affordable channels for direct transactions. This study examines the impact of a for-sale-by-owner platform on real estate agents' listing prices. The findings show that the introduction of the platform leads to a 2.8% decrease in listing prices, comparable to agents' commission rates, and the cost advantage provided by the platform is the primary driver behind this price drop. The study also finds that reduced listing prices affect the final sales price of properties.
Intermediary agents play a crucial role in connecting sellers and buyers across various markets. However, the emergence of digital platforms has provided more affordable channels for direct transactions, challenging the dominance of agents. In this study, we examine the impact of a for-sale-by-owner (FSBO) platform on real estate agents' listing prices. By using a natural experiment in China, we find that the introduction of the FSBO platform leads to a 2.8% decrease in listing prices, a percentage comparable to the commission rate typically charged by agents. The cost advantage provided by the FSBO platform appears to be the primary driver behind this price drop rather than selection bias in listings. Furthermore, the impact of reduced listing prices extends to the final sales price of the properties. These findings carry important policy implications for competition regulation of intermediaries.

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