The Multiple Listing Service, Commission Splits, and Broker Effort

This paper examines the impact of split commissions on broker effort in MLS sales. The joint effort of brokers to find a buyer for a given listing is maximized when the broker who locates a buyer first receives the entire commission. In contrast, splitting the commission between the listing and finding broker (when they differ) maximizes the joint profits of brokers. When competition among brokers to acquire listings is considered, however, the split brokers most prefer entails a smaller (though still positive) share for the listing broker in order to reduce wasteful competition for listings. While sellers still prefer to pay only the broker who finds a buyer, brokers may not be willing to acquire and share listings under such an arrangement. Copyright American Real Estate and Urban Economics Association.