An analysis of auction strategies in apartment sales

Purpose This paper aims to empirically test the effect of list price and bidding strategies in ascending auctions of residential real estate. Design/methodology/approach Three regression models are estimated, using a unique data set from 629 condominium apartments in the inner-city of Stockholm, Sweden, sold between January 2010 and December 2011. Findings The results show that jump bidding has the predicted effect of reducing competition by scaring off bidders. However, a higher average bid increment leads to a higher selling price. Furthermore, results show that a fast auction in terms of average time between bids acts to increase the probability of so-called auction fever as both the number of bidders and the selling price are positively correlated with the speed of the auction. While the average behavior of all auction participants, in terms of jump bidding and time between bids, significantly affects auction outcomes, differences in strategies applied by winners and losers show mixed results. The results of this study with respect to sellers’ list price strategy show that underpricing is an ineffective strategy in terms of enticing more bidders to participate in the auction. Furthermore, underpricing is not sufficient to have a positive effect on the selling price. Originality/value This paper is one of the first papers to empirically analyze how different bidding strategies affect the outcome of residential real estate auctions in terms of competition and the final selling price.

A Study of Bidding Behavior in Voluntary-Pay Philanthropic Auctions

The authors investigate compliance behavior and revenue implications in winner-pay and voluntary-pay auctions in charity and noncharity settings. In the voluntary-pay format, the seller asks all bidders to pay their own high bid. The authors explore motives and boundary conditions for compliance behavior based on internal and external triggers of social norms. The voluntary-pay format generates higher revenue than the winner-pay format for charity auctions, despite imperfect compliance, but it generates lower revenues in noncharity settings. To characterize bidding strategy, the authors study time to bid, auction choice, and jump bidding and find evidence that bidders in voluntary-pay auctions more commonly use jump bidding and late entry. The findings have important implications for marketing managers, augmenting the growing stream of empirical auction studies and work on corporate social responsibility. Specifically, combining an auction with a charitable cause may result in increased revenues, but managers should ensure that they are accounting for differential compliance rates between auction formats. Even if low-compliance bidders can be identified and screened out, doing so is not advantageous, because noncompliant bidders bid up prices.