Housing Markets - 4

In a bargaining situation there is generally more unpredictability the less you know about the person you are dealing with. If you know the other person very well, you can better predict the compromise solutions that will obtain as the outcome of the deal.

In any case, you can always walk away form the deal. What you can net in excess of what you expect to achieve by walking away is a "surplus." One way to think about competitive markets is that the surpluses for buyers and sellers are small, bordering on negligible. In that case, the price variation that is observed must be a consequence of the variation in the qualities of the goods and services being traded.

Let's turn to another very interesting aspect of housing markets --- the prevalence of intermediaries to facilitate transactions. The key point is that unlike sales people who work in retail, these intermediaries are not employed by the buyer or the seller but are instead contracted out to provide their services to facilitate the particular transaction.

One type of intermediary is the real estate agent or broker. An aspect of the agents' job is to provide information to the client. For example, if a potential buyer is considering purchase of a home, the agent will provide information about available housing. Can you think of other ways that the buyer might get this type of information? What sources would be consulted?