Abstract
While many studies have emphasized the efficiency and cost benefits from transacting within social structures, it remains unclear the extent to which experts and firms can create and appropriate value when transacting with socially-affiliated clients, especially in the absence of repeat transactions. I investigate this question using a novel approach that pairs data from the Wasatch Front Regional Multiple Listing Service in Utah with hand-collected data on geographically assigned LDS (Mormon) congregation boundaries. By identifying listings for which real estate agents and home sellers share a common church congregation affiliation, I explore the impact of affiliations on the value listing agents create and appropriate in real estate transactions. I find that agents sell comparable homes for 2% more when listing for affiliates without significantly increasing time on market, and exert more care and effort on transactions. Moreover, agents increase use of dual agency by 17% when listing for affiliates, suggesting affiliations provide agents increased flexibility and access to value appropriation tactics. Data on exogenous shocks to congregation boundaries suggest results are driven by current social affiliations, and not simply by proximity. Overall my results show firms increase revenues significantly as the percentage of listings with affiliated clients increases. This suggests a more nuanced view of social structures is needed that incorporates individual choice, the context, and the opportunity space created for value appropriation by information advantages and assumed trust.
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