Freakonomics

Media Type: Film Clips Topic: Incentives, The Firm

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Does your real estate agent have your best interest in mind? This scene shows why real estate agents have a strong incentive to sell your house at any reasonable price. For them the big incentive is to close a sale. For instance, if you sell your house for $200,000 a 6% commission is worth $12,000. If you sell the house for $195,000, the real estate agent still makes $11,700 which is lot more than they will make if the deal does not close. This is one of the best examples of thinking about the power of incentives.  

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