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Do Reserve Prices Yield Reference Price Effects in Korean Court Auctions of Residential Real Estate?

Author

Listed:
  • Han-Jang No

    (National Pension Service Gyeongin Regional Headquarter)

  • Dai-Won Kim

    (Dankook University)

  • Jung-Suk Yu

    (Dankook University)

Abstract

This study examines whether the reserve prices in court auctions of residential real estate in Seoul, Korea result in reference price effects by influencing the amount of the successful bid. We also explore whether the sensitivity of these reference price effects differ with housing size and assess whether the expected rate of the selling price can be predicted based on the different reserve price levels. The panel data estimates presented herein show that reserve prices positively influence the final property transfer prices; in other words, the reserve prices yield strong reference price effects. The results of the ordinary least square regressions show that the sensitivity of the reference price effects differs with housing size, albeit in an inconsistent manner. Finally, the response surface methodology analysis indicates that different reserve prices lead to different reference price effects with locality across the Seoul metropolitan area. The study thus provides courts and bidders with the means to predict the potential rate of the selling price, which will be useful for decision making in auctions.

Suggested Citation

  • Han-Jang No & Dai-Won Kim & Jung-Suk Yu, 2017. "Do Reserve Prices Yield Reference Price Effects in Korean Court Auctions of Residential Real Estate?," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 75-104.
    • Handle: RePEc:ire:issued:v:20:n:01:2017:p:75-104
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    References listed on IDEAS

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    More about this item

    Keywords

    Reference Price Effect; Reserve Price; Auctions of Residential Real Estate; Panel Regression; Response Surface Methodology;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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