Testing for Price Anomalies in Real Estate Auctions
This paper reports on the results of an auction sale of 83 condominium apartment units in New Jersey. At the auction every unit was hammered down, but, unknown to the 2,348 registered bidders, 40% of the sales fell through. Prices in the subsequent sale of condominium units in face to face negotiations resulted in identical units selling for 13% less than they fetched at auction and the discount was largest for those units hammered down early in the auction. These results are inconsistent with the usual predictions from the theory of common value auctions and suggest that uninformed bidders in this auction may have been the subject of a "winner's curse" which generated considerable profit for the seller.
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References listed on IDEAS
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- Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
- Vanderporten, Bruce, 1992. "Timing of Bids at Pooled Real Estate Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 5(3), pages 255-267, September.
- R. Preston McAfee & Daniel Vincent, 1991. "The Afternoon Effect," Discussion Papers 961, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kagel, John H. & Levin, Dan, 1986. "The Winner's Curse and Public Information in Common Value Auctions," American Economic Review, American Economic Association, vol. 76(5), pages 894-920, December.
- John H. Kagel & Colin M. Campbell & Dan Levin, 1999.
"The Winner's Curse and Public Information in Common Value Auctions: Reply,"
American Economic Review,
American Economic Association, vol. 89(1), pages 325-334, March.
- Kagel, John H & Levin, Dan, 1991. "The Winner's Curse and Public Information in Common Value Auctions: Reply," American Economic Review, American Economic Association, vol. 81(1), pages 362-369, March.
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