Blockbusting: Brokers and the dynamics of segregation

Legal and historical evidence suggest that real estate brokers played a substantial role in the white flight. This paper introduces real estate brokers in a tipping model of segregation. The model features voluntary disclosure of information by the broker in a game with private information and strategic complementarities. Real estate brokers can shift the equilibrium by disclosing information on black households’ valuation of housing, which are not perfectly known by households; brokers maximize profit on commission fees and disclose information accordingly. Strategic information disclosure is beneficial to black households and detrimental to white households. ∗INSEAD and London School of Economics, [email protected]. †I would like to thank Denis Gromb, Guy Laroque, Romain Ranciere, Joel Slemrod, and Tim Van Zandt, for fruitful conversations and comments on this paper. I would like to thank also audiences of CREST, the London School of Economics, and INSEAD. The usual disclaimers apply.