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Auctions versus Negotiated Sale: Evidence from Real Estate Sales

  • YuenLeng Chow
  • Isa Hafalir
  • Abdullah Yavas

We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous, and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions that the auction mechanism obtains a higher relative price in an “up market” than in a flat or down market, in the high-end segment of the property market, and for relatively homogeneous properties than heterogeneous properties.

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Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2012-E22.

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Handle: RePEc:cmu:gsiawp:1651563260
Contact details of provider: Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
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  8. Tadenuma, Koichi & Thomson, William, 1991. "No-Envy and Consistency in Economies with Indivisible Goods," Econometrica, Econometric Society, vol. 59(6), pages 1755-67, November.
  9. Alcalde, Jose & Romero-Medina, Antonio, 2011. "Re-Reforming the Bostonian System: A Novel Approach to the Schooling Problem," MPRA Paper 28206, University Library of Munich, Germany.
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