Paying for a Name? Comparing the Performance of Franchised Real Estate Brokerage Firms

  • Stephen L. LockeEmail author


This paper compares the relative performance of franchised and independent real estate brokerage firms. One problem that arises when comparing the performance of two different brokerage types is that agents may self-select into a particular type. The empirical methods used control for potential self-selection by using within-agent variation in franchise affiliation for agents who have worked for both types of brokerage firms. The results suggest that agents self-select into particular real estate brokerage types and firms. Thus, failing to account for self-selection can lead to substantial bias.


Real estate Franchising Self selection Housing 



I want to thank Glenn Blomquist, Frank Scott, Adib Bagh, Bill Hoyt, and Karen Blumenschein for all of their helpful comments and suggestions.


  1. Anderson, R., & Fok, R. (1998). The efficiency of franchising in the residential real estate brokerage market. Journal of Consumer Marketing, 15(4), 386–396.Google Scholar
  2. Anglin, P., Rutherford, R., Springer, T. (2003). The trade-off between the selling price of residential properties and time-on-the-market: The impact of price setting. The Journal of Real Estate Finance and Economics, 26(1), 95–111.Google Scholar
  3. Benjamin, J., Chinloy, P., Jud, D., Winkler, D. (2006). Franchising in residential brokerage. Journal of Real Estate Research, 28(1), 61–70.Google Scholar
  4. Brastow, R.T., Springer, T.M., Waller, W.B.D. (2012). Efficiency and incentives in residential brokerage. Journal of Real Estate Finance and Economics, 45(4), 1041–1061.Google Scholar
  5. Brickley, J., & Dark, F. (1987). The choice of organizational form the case of franchising. Journal of Financial Economics, 18(2), 401–420.Google Scholar
  6. Carson, R.T., & Dastrup, S.R. (2013). After the fall: an ex post characterization of housing price declines across metropolitan areas. Contemporary Economic Policy, 31(1), 22–43.Google Scholar
  7. Caves, R.E., & Murphy, W.F. (1976). Franchising: firms, Markets, and Intangible Assets. Southern Economic Journal, 42(4), 572–586.Google Scholar
  8. Frew, J., & Jud, G. (1986). The value of a real estate franchise. Real Estate Economics, 14(2), 374–383.Google Scholar
  9. Jud, G., Rogers, R., Crellin, G. (1994). Franchising and real estate brokerage. The Journal of Real Estate Finance and Economics, 8(1), 87–93.Google Scholar
  10. Klein, B. (1980). Transaction cost determinants of “unfair” contractual arrangements. The American economic review, 70(2), 356–362.Google Scholar
  11. Levitt, S., & Syverson, C. (2008). Market distortions when agents are better informed: The value of information in real estate transactions. The Review of Economics and Statistics, 90(4), 599–611.Google Scholar
  12. Mathewson, G.F., & Winter, R.A. (1985). The economics of franchise contracts. Journal of Law and Economics, 28(3), 503–526.Google Scholar
  13. Minkler, A. (1990). An empirical analysis of a firm’s decision to franchise. Economics Letters, 34(1), 77–82.Google Scholar
  14. Munneke, H.J., & Yavas, A. (2001). Incentives and performance in real estate brokerage. Journal of Real Estate Finance and Economics, 22(1), 5–21.Google Scholar
  15. National Association of Realtors. (2017). 2017 national association of REALTORS member profile. Accessed January 11, 2019.
  16. National Association of Realtors. (2018). 2018 profile of home buyers and sellers. Accessed April 30, 2019.
  17. Rubin, P. (1978). The theory of the firm and the structure of the franchise contract. Journal of Law and Economics, 21(1), 223–233.Google Scholar
  18. Rutherford, R., & Yavas, A. (2012). Discount brokerage in residential real estate markets. Real Estate Economics, 40(3), 508–535.Google Scholar
  19. Yelowitz, A., Scott, F., Beck, J. (2013). The market for real estate brokerage services in low- and high-income neighborhoods: a six-city study. Cityscape, 15(1), 261–292.Google Scholar
  20. Zumpano, L.V., Elder, H.W., Baryla, E.A. (1996). Buying a house and the decision to use a real estate broker. The Journal of Real Estate Finance and Economics, 13(2), 169–181.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsWestern Kentucky UniversityBowling GreenUSA

Personalised recommendations