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Foreclosure Auctions

Author

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  • Niedermayer, Andreas
  • Shneyerov, Artyom
  • Xu, Pia

Abstract

We develop a novel theory of real estate foreclosure auctions, which have the special feature that the lender acts as a seller for low and as a buyer for high prices. The theory yields several empirically testable predictions concerning the strategic behavior of the agents, both under symmetric and asymmetric information. Using novel data from Palm Beach County (FL, US), we �nd evidence of both strategic behavior and asymmetric information, with the lender being the informed party. Moreover, the data are consistent with moral hazard in mortgage securitization: banks collect less information about the value of the mortgage collateral.

Suggested Citation

  • Niedermayer, Andreas & Shneyerov, Artyom & Xu, Pia, 2015. "Foreclosure Auctions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 522, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:522
    as

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    File URL: https://epub.ub.uni-muenchen.de/25321/1/522SFB.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreclosure Auctions; Asymmetric Information; Bunching; Discontinuous Strategies; Securitization;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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