Buyer brokerage: Incentive and efficiency implications

This article examines the incentive and efficiency implications of buyer br okerage. We show that it is possible to perfectly align the interests of th e seller with those of his agent and the interests of the buyer with those of his agent. Furthermore, effort levels can be efficient. This result is a departure from earlier conclusions in the literature that the agent's effo rt level can neither be perfectly aligned with the principal's interests no r be efficient. The departure is primarily due to the feature of our model that it recognizes the costs as well as the benefits of an agent's effort t o her principal, and vice versa. Finally, we discuss the implications of bu yer brokerage for the future of MLS services.