[cortesoft]

Well, the buyer’s employer is actually the one paying the buyer the money that goes to the mortgage, are we going to start saying the employer is the one buying the house? No, because that is just how the economy works, money changes hands constantly.

We say the person who makes the choice for the purchase is the one who paid for something… the seller signs the contract with the agent, so they are the ones paying.

[pzo]

When you selling any kind of product or service the price you gonna charge will take into account expenses that you have to sell or make this product, e.g. if you sell app in appstore and Apple and other taxes will eat 45% of your app price and you know you will break even at $1 per app profit then definitely you will ask user for $2.

[cortesoft]

This doesn’t apply to most people selling a house. Sellers are not setting the price for their house, buyers bidding for it do.

Anyone selling a house using an agent isn’t someone who manufactures houses. They are mostly people selling their own home because they are moving to a different home.

They are going to put their house up for sale, buyers will make offers, and the seller will choose the best offer. The buyers are making offers based on what they are willing and able to pay; they don’t care whether 100% of that sale price goes to the seller or if only 94% does. They are making the same offer no matter what.

And sellers aren’t going to take 6% less if they don’t have an agent. They are going to take the same offer whether they get 94% of it or 100%; they are taking the best offer made.

Even your app example isn’t how it works. There is no “break even” price for a digital good that doesn’t have a COG (cost of good). App manufacturing has a fixed price, and then every unit sold costs them zero dollars.

They are going to set the price to be what maximizes the value of “cost per unit * units sold”. That equation is going to be the same no matter what the App Store percentage is. The only thing the percentage does will be to change the amount of money the company makes and change the equation on whether it is worth making the app at all; once the app is created, the only thing that will determine the price is the equation above, not the cost per sale.

So many people seem to have this idea that prices for things are based on some “cost per good + profit margin = price”, but that isn’t how any good is priced. Many goods end up being priced in a way that is close to that, but that is only because of robust competition. Prices are set by the seller trying to figure out which price will generate them the most profit; the cost to make the good only sets a price floor, where if they can’t get more than that amount, it simply isn’t even worth it to make and sell the good. It has nothing to do with the price ceiling.

[pzo]

> They are making the same offer no matter what

Obviously seller can decide if agree on minimum price. Otherwise I doubt if someone would sell if bidding would end at $1k for a home. If seller wanna sell apartment for $100k then they expect that someone bids with $105k to covert agent fee.

> And sellers aren’t going to take 6% less if they don’t have an agent.

Why not? I many times did a deal with AirBnB host after few weeks of renting by talking with them directly and asking for the same rent minus AirBnB fees. They had no problems with that because they would earn the same amount and only cutting the middle man.

> the cost to make the good only sets a price floor,

Fee based on percent like 6% doesn't have any floor. You really believe that if we now change this fee to 66% this wouldn't have any impact on buyer and buyer would be fine because this 66% fee is paid buy seller?

[cortesoft]

AirBnB is very different. They are taking that deal because it is easy, and they don't have an easy way to find other renters without airbnb... airbnb is providing a match making service between renters and rentees. When you are selling the house, it is a one time sale for a large amount of money. In this market, you will get a LOT of offers for your house; you will obviously accept the highest offer, whether you have an agent or not. Why would a seller choose to make less money? Your airbnb example wasnt the person taking less money, they were getting the same money; the house example would actually be taking less money. They would never do that.

[aiaiaiaiaiai]

But will they pay? They may or may not, it depends on what it is. If you could get $2 without losing sales why would you have ever charged $1?

I get that middlemen and trends can affect price anchroring. So it isnt completely black and white.