Despised, slippery and untrustworthy? an analysis of reputation in estate agency

Abstract

This paper presents an analysis of the reputation of estate agents within the context of principal-agent theory. It is argued that the poor reputation of many agents arises from a combination of product and market characteristics including product intangibility and heterogeneity, joint production by vendor and agent, infrequent purchasing, low barriers to entry and environmental uncertainty. Various solutions to the problem are discussed including certification, contingent contracts and reputation-building. An empirical analysis based on a recent survey of estate agents suggests that a link between reputation and the form of contract signed may help to reduce the problems in the market. The paper concludes with a discussion of policy options for the improved regulation of the industry.

Keywords:

• estate agency
• reputation
• principal-agent