Abstract
We investigate two mechanisms that plausibly curtail agency costs in the homeowner-listing agent relationship. Empirically, we find that differences in compensation structures across brokers effectively mitigate agency costs, while additional training associated with licensure made little, if any, difference. The evidence is consistent with managers/partners of a brokerage (principal brokers) having stronger incentives to internalize potential reputational spillovers for their brokerage offices. For identification, we exploit the timing of brokers' incentives changing using a difference-in-differences (within agent) approach. Further, in a triple-difference specification that leverages a setting where local reputational incentives are most instrumental, we find the clearest evidence of agency cost mitigation among principal brokers of non-franchise, locally owned brokerages.
