Abstract
AbstractWe introduce a principal–agent model where a real estate agent has private information that is important for a home seller to make decisions on marketing strategies. The seller designs a commission contract that motivates the agent to acquire information and then truthfully reveal it. We find that fixed commission rates are optimal if the agent has no private information or if his private information is given. If the agent's private information is acquired endogenously, the optimal commission rate should vary with the information revealed by the agent. The varying commission rate, however, is associated with distorted decisions on marketing strategies.
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