Complaints Against Agents and Agent's Incentives : Evidence from Housing Transactions

This paper investigates the impact of complaints against agents on agents’ incentives in housing transactions. Our model shows that complaints incentivize an agent to exert greater efforts and mitigate the conflict of interest due to the agent’s concern for reputation and future career. Our model also shows that the reputation recovery benefits from exerting greater efforts and the commission rate play important roles in determining the impact of complaints on the incentives of agents. We find that complaints against agents have positive impacts on a house’s sale price and negative impacts on other transaction outcomes such as the probability of a house sale and the listing time on markets. Results from regressions for the full sample and for propensity score matched samples support our model predictions. Our empirical results also find evidence of gender and race differences in responding to complaints in the housing market