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First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions

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  • Yuen Leng Chow
  • Joseph T.L. Ooi

Abstract

type="main"> This article compares whether the first-price sealed-bid tender or the ascending English open auction generates higher revenue for the seller. Using a unique set of data for land sales and accounting for the presence of an endogenous discrete mechanism choice variable, our results show that the first-price sealed-bid tender generates a lower land price, in the range of 1.2–9.6%, than the English open auction. Our results validate the theoretical prediction that open auctions result in higher prices because bidders can infer other bidders’ information by observing their bids in the common value auction paradigm.

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  • Yuen Leng Chow & Joseph T.L. Ooi, 2014. "First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(2), pages 253-278, June.
    • Handle: RePEc:bla:reesec:v:42:y:2014:i:2:p:253-278
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    File URL: http://hdl.handle.net/10.1111/1540-6229.12035
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    Cited by:

    1. Onur A. Koska & Ilke Onur & Frank Stähler, 2017. "The Economics of Vendor Bids," ERC Working Papers 1711, ERC - Economic Research Center, Middle East Technical University, revised Oct 2017.
    2. Hungria Gunnelin, Rosane, 2020. "Bidding strategies and winner’s curse in auctions of non-distressed residential real estate," Working Paper Series 20/13, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    3. Lian, Hongping & Li, Hui & Ko, Kilkon, 2019. "Market-led transactions and illegal land use: Evidence from China," Land Use Policy, Elsevier, vol. 84(C), pages 12-20.
    4. Zhang, Yunyi & Gong, Pu, 2018. "IPV model with Cobb–Douglas and reference-dependent utility functions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 121-131.
    5. Zan Yang & Shuping Wu, 2019. "Land acquisition outcome, developer risk attitude and land development timing," The Journal of Real Estate Finance and Economics, Springer, vol. 59(2), pages 233-271, August.

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