Focus or Generalize: Real Estate Agent Effort Allocation and Compensation

When agents have opportunities in both selling and non-selling related activities, the rising opportunity cost of time induces greater focus on the former, with contracted support for the pursuit of unrelated real estate activities, thus driving a positive relationship between specialization and income. Nonetheless, income may decline empirically with greater specialization when the population of most specialized agents includes those with either low opportunity costs or the least ability to earn ancillary income. Data drawn from a multi-year survey of real estate professionals indicate that income rises with greater specialization except for the most specialized. The latter result is consistent with the notion that a mix of agents at the highest specialization levels enjoys different opportunity costs or ranges of income opportunities.