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Awareness of Conflicts of Interest in the Swedish Tenant Representation Industry and How Tenants Are Affected
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2015 (Swedish)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Awareness of Conflicts of Interest in the Swedish Tenant Representation Industry and How Tenants Are Affected (English)
Abstract [sv]

Real estate firms operating in the field of tenant representation may represent both tenants and

landlords. As such their interests might be in conflict with those of the tenants they represent.

A questionnaire was created and sent to 800 individuals. 78% of respondents indicated that

they are aware of such conflicts. Meanwhile, only 40% of the respondents perceived such

conflicts to be positive rather than negative.

A game theoretical model showing how a tenant hires a tenant representative was created with

three different scenarios, all using data from the questionnaire to mimic reality as closely as

possible. In the first scenario, a tenant hires a representative at one occasion only. In the

second scenario a tenant is considering to hire the representative for two sequential

transactions. In the third scenario, a contract is introduced to ensure alignment of incentives

between the representative and the tenant.

The questionnaire and the modelling shows that if no incentivized contract is written the

representative always benefits from engaging in conflicting business and, regardless of the

conflict of interest and extra benefit to the representative, the tenant always benefits from

hiring the representative. However, introducing a contract to align incentives it is shown that

there exists a break even point at which the representative starts to benefit from not engaging

in business with conflicting interests.

Moreover, there exists little correlation between awareness and perceived effect, involvement,

or premises size.

Abstract [en]

Real estate firms operating in the field of tenant representation may represent both tenants and

landlords. As such their interests might be in conflict with those of the tenants they represent.

A questionnaire was created and sent to 800 individuals. 78% of respondents indicated that

they are aware of such conflicts. Meanwhile, only 40% of the respondents perceived such

conflicts to be positive rather than negative.

A game theoretical model showing how a tenant hires a tenant representative was created with

three different scenarios, all using data from the questionnaire to mimic reality as closely as

possible. In the first scenario, a tenant hires a representative at one occasion only. In the

second scenario a tenant is considering to hire the representative for two sequential

transactions. In the third scenario, a contract is introduced to ensure alignment of incentives

between the representative and the tenant.

The questionnaire and the modelling shows that if no incentivized contract is written the

representative always benefits from engaging in conflicting business and, regardless of the

conflict of interest and extra benefit to the representative, the tenant always benefits from

hiring the representative. However, introducing a contract to align incentives it is shown that

there exists a break even point at which the representative starts to benefit from not engaging

in business with conflicting interests.

Moreover, there exists little correlation between awareness and perceived effect, involvement,

or premises size.

Place, publisher, year, edition, pages
2015.
Keyword [en]
Tenant representation, Conflicts of interest, Awareness, Game theory
Keyword [sv]
Tenant representation, Conflicts of interest, Awareness, Game theory
National Category
Engineering and Technology
Identifiers
URN: urn:nbn:se:kth:diva-172118OAI: oai:DiVA.org:kth-172118DiVA: diva2:845791
Supervisors
Examiners
Available from: 2015-08-13 Created: 2015-08-13 Last updated: 2015-08-13Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
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  • Other locale
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Output format
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