Will a Fixed-Rate Commission Contract Continue to Prevail?

Abstract The fixed-rate full-service brokerage contract has been the dominant selling method in the residential property market despite arguments that it might result in social inefficiency and instability in the brokerage industry. We believe that the reasons for its dominance are the use of the Multiple Listing Service and the difficulty in monitoring agents' efforts. We develop an equilibrium commission rate model and analyze the conditions under which it can be used to replace the traditional fixed-rate contract. With an increase in online services providing property listing and transaction information, it is possible that brokerage services can be flexible in the future.