Importance of Professional Networks in Trade: Evidence from Real Estate Market

Real estate agents often search randomly or navigate through local network to find trading partners. This article estimates the importance of network‐based searches relative to random searches by fitting Jackson–Rogers' model to the multiple listing service data for a major Midwestern city in the United States. We find that 35%–55% of trades are made through network‐based searches. Moreover, agents rely mainly on random searches at early stage of career, but more on network‐based searches after having many trades. On average, a real estate agent trades with 1 out of every 5–10 agents she finds through searches.