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Research Seminars & Workshops @ IRES


Dr Jing Li
Singapore Management University

Price Run-ups in Strategic Sequential Bidding for Government Land Auction Sales – Evidence from Singapore


Date:

16 November 2015 (Monday)

Time:

3.30pm - 5.00pm

Venue:

RMI Executive Seminar Room, 21 Heng Mui Keng Terrace, I3 Building, Level 4


Abstract

This paper studies the extent to which equilibrium auction prices are affected by the order of sale and the extent of product differentiation in the context of government land auction sales. We propose a two-stage differentiated duopoly model where an incumbent winner of land from a previous auction bids on a new piece of land with the anticipation of competition between developed properties on both land parcels. The model suggests that the closer substitutes both plots of land are, the more likely that the incumbent will bid higher. The model also predicts that the incumbent will bid higher than the winning price of the previous parcel, but may not necessarily win the bid. Using a unique dataset that covers the universe of tendering prices submitted by all developers for all residential land auction sales in Singapore, we test this theory and find that a tenderer’s bids are higher where there was a previous piece of land sold within two years and located within four kilometers. The increased price margin decreases as the distance becomes larger or as the time lag becomes longer. Moreover, by comparing the sequential bidding behavior of the incumbent and the second highest bidder with slightly lower bid, we show that the incumbent is more likely to participate in subsequent auction sales, especially for closer sites. The evidence on winning the same site is insignificant, consistent with our model predictions.

About the Speaker

Jing Li is an Assistant Professor of Economics at Singapore Management University. Her research interests are in Urban Economics, Health Economics, and Real Estate Finance. She has published recently in the Journal of Urban Economics, Regional Science and Urban Economics, and the Journal of Applied Econometrics. She graduated from Syracuse University in May of 2013 with a Ph.D. in Economics. She also has a previous Master's Degree in Finance from Harbin Institute of Technology in China.

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