We generalize the classic Williams (1998, Review of Financial Studies, 11, 239–280) brokerage model by introducing diffused effort and asset heterogeneity. The term "diffused effort" refers to the fact that an agent can cross‐utilize effort spending on one listing to another. One counterintuitive finding in Williams' paper is the absence of the agency problem. As a special case in our model, we recover the agency problem. We demonstrate the positive externality due to the diffused effort and show it depends on the agent's inventory size. Hence, there is a trade‐off between agents' effort committed to existing listings and expanding network size by soliciting new listings.
