2020
Working Paper
HBS Working Paper Series

Collusion in Brokered Markets

By: John William Hatfield, Scott Duke Kominers and Richard Lowery

Format:Print
| Language:English
| Pages:67

Abstract

The U.S. residential real estate agency market presents a puzzle for economic theory: commissions on real estate transactions have remained high for decades even though entry is frequent and costs are low. We model the real estate agency market, and other brokered markets, as a game in which brokers first post prices for customers and then choose which other agents to work with. We show that prices appreciably higher than the competitive level can be sustained (for a fixed discount factor) regardless of the number of brokers by using strategies that condition working with a broker on that broker’s posted prices.

Keywords

Real Estate; ＂Repeated Games＂; Collusion; Antitrust; Brokered Markets; Game Theory; Real Estate Industry

Citation

Hatfield, John William, Scott Duke Kominers, and Richard Lowery. "Collusion in Brokered Markets." Harvard Business School Working Paper, No. 20-023, September 2019. (Revised July 2020.)