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Integrating Auction and Search Markets: The Slow Dutch Auction

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  • Adams, Paul D
  • Kluger, Brian D
  • Wyatt, Steve B

Abstract

The issue of choosing to sell property by auction or by traditional negotiated search markets is addressed in this article. A general selling institution called the slow Dutch auction is introduced. This general selling mechanism reduces to either a conventional auction, a posted offer, or some time dependent mix of these selling institutions depending on the pricing rule chosen by the seller. The authors model search by having potential buyers whose private valuation for the property is unknown to the seller arrive randomly over time. With this general framework the seller's problem is to choose a selling mechanism that maximizes expected wealth. Surprisingly, they find that the optimal selling institution is always a posted.offer market. The seller chooses an optimal posted price and waits until a buyer arrives who is willing to pay this price. Auctions are never optimal. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Adams, Paul D & Kluger, Brian D & Wyatt, Steve B, 1992. "Integrating Auction and Search Markets: The Slow Dutch Auction," The Journal of Real Estate Finance and Economics, Springer, vol. 5(3), pages 239-253, September.
    • Handle: RePEc:kap:jrefec:v:5:y:1992:i:3:p:239-53
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    Cited by:

    1. Stevenson, Simon & Young, James & Gurdgiev, Constantin, 2010. "A comparison of the appraisal process for auction and private treaty residential sales," Journal of Housing Economics, Elsevier, vol. 19(2), pages 145-154, June.
    2. Julien Pascal, 2023. "Rental housing market and directed search," BCL working papers 179, Central Bank of Luxembourg.
    3. Stephen Buschbom & Carolyn Dehring & Neil Dunse & Henry Munneke, 2018. "Sealed-Bid Auctions and Fixed Price Sales: Seller Choice in Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 525-545, May.
    4. Christopher J. Mayer, 1993. "A model of real estate auctions versus negotiated sales," Working Papers 93-3, Federal Reserve Bank of Boston.
    5. Christopher J. Meyer, 1993. "Assessing the performance of real estate auctions," Working Papers 93-1, Federal Reserve Bank of Boston.
    6. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 813-886, Elsevier.
    7. Carl R. Gwin & Seow-Eng Ong & Andrew C. Spieler, 2005. "Auctions and Land Values: An Experimental Analysis," Urban Studies, Urban Studies Journal Limited, vol. 42(12), pages 2245-2259, November.
    8. Simon Stevenson & James Young, 2015. "The probability of sale and price premiums in withdrawn auctioned properties," Urban Studies, Urban Studies Journal Limited, vol. 52(2), pages 279-297, February.
    9. Eklof, Matias & Lunander, Anders, 2003. "Open outcry auctions with secret reserve prices: an empirical application to executive auctions of tenant owner's apartments in Sweden," Journal of Econometrics, Elsevier, vol. 114(2), pages 243-260, June.
    10. Alan W. Evans & Paul K. Asabere & Forrest E. Huffman, 1994. "The Price Determinants of Foreclosed Urban Land: A Discussion," Urban Studies, Urban Studies Journal Limited, vol. 31(10), pages 1777-1782, December.
    11. Fuerst, Franz & Gabrieli, Tommaso & McAllister, Patrick, 2017. "A green winner's curse? Investor behavior in the market for eco-certified office buildings," Economic Modelling, Elsevier, vol. 61(C), pages 137-146.
    12. Abdul - Rasheed Amidu & Alirat Olayinka Agboola, 2009. "Empirical Evidence Of The Influences On First-Price Bid Auction Premiums," International Real Estate Review, Global Social Science Institute, vol. 12(2), pages 157-170.

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