By Arnold Kling
The New York Times profiles Steven Levitt, the recent Clark Medal winner.
Using data from more than 50,000 home sales in Cook County, Ill., he compared the figures for homes owned by real-estate agents with those for homes for which they acted only as agents. The agents’ homes stayed on the market about 10 days longer and sold for 2 percent more.
One proposed reform in real estate is to use marginal commissions rather than average commissions. Instead of earning, say, 6 percent of the total sales price of the house, the agent would earn, say, 50 percent of the difference between the sales price and a benchmark price. The benchmark price might be 90 percent of the appraised value of the house. How would that affect real estate agent behavior?