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Jump bids in real estate auctions

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  • Sommervoll, Dag Einar

Abstract

The lion’s share of Norwegian homes changes hands through closely monitored and regulated auctions. Some housing market experts advocate the supremacy of a jump bid, a significant bid increase to discourage fellow bidders, and thereby acquire the dwelling at a lower price compared to bidding strategy with moderate bid increases. We find no evidence for the efficacy of this jump bid strategy. Jump bidders, if successful, pay a positive jump premium. This also applies to the case where the jump is not the final bid and the jump bidder win at a later stage. In this case, the jump bid premium is around 1 to 2%. However, a jump bid is a credible signal of “serious intentions”. Jump bidders tend to win auction more often even in cases, where the jump bid is matched, and the auction continues.

Suggested Citation

  • Sommervoll, Dag Einar, 2020. "Jump bids in real estate auctions," Journal of Housing Economics, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:jhouse:v:49:y:2020:i:c:s1051137720300498
    DOI: 10.1016/j.jhe.2020.101713
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    More about this item

    Keywords

    Real estate auctions; Jump bids;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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