Brown Bag Seminar Industrial Economics

This paper relates incomplete price competition among real estate agents to inattentive home sellers. I exploit a recent legal reform in Germany which specifically aimed to increase price competition among real estate agents by raising the cost salience of sellers. I find that the reform backfired and real estate agents exploited the transition to increase their total commission rate by 0.3 percentage points. Showing that explicit collusion is unlikely, I argue that this arbitrary increase points to seller inattention instead. To verify if and why sellers fail to induce competitive pressure, I run a pre-registered survey experiment with 1,062 real estate agents. The survey confirms that 85 percent of sellers do not demand lower commission rates. The randomized experimental questions suggest that real estate agents may cater to seller inattention by providing misleading reference commission rates and shrouding the pass-through to sellers.