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Abstract How much information should brokers supply on a website? The Internet allows brokers to reduce the cost of providing information to potential buyers. However, brokers may risk disintermediation if they provide too much information. This paper presents a model of a broker's choice of how much information to provide on a website. The model considers buyers' tradeoffs between hiring a broker and gathering information on their own. It then investigates why real estate brokers in different countries provide different amounts of information on websites. Tests reveal that information provided on broker websites depends on the search cost of prospective buyers.
Introduction
Real estate brokers can utilize the Internet to reduce the cost of providing information to potential buyers. The upside for the broker is that buyers can match with sellers and self-select properties they are interested in and reduce the time and cost a broker must spend identifying and showing properties to the buyer. Moore (2000) states: "A better-informed consumer leads to a more productive agent, which can save time and money for the real estate company." The broker essentially transfers the cost of the time to select properties to the potential buyer. However, a downside may exist if the potential buyer sees an opportunity to cut out the broker and attempts to locate and purchase the property, thus saving the broker's commission charges. A broker may risk disintermediation if too much information is provided. For example, almost no real estate websites provide property addresses. The likely reason is that buyers could seek out the seller on their own and cut out the broker.
What are the risks of the Internet for real estate brokers? What factors are important in weighing these risks? These are questions that are of great interest to the brokerage industry. Exploring theoretical and empirical models of the potential of the Internet to reduce both broker income and the demand for brokerage services are important tasks for researchers. This paper takes an important step in this research with a formal analysis of the factors that may influence a real estate broker's decision on how much information to provide on a website. The contribution of this study is in developing and testing a theoretical model that demonstrates the tradeoffs a...