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Price
Formation under Small Numbers Competition: Evidence from Land Auctions
in Singapore
URAG Working Paper #04-03
Price Formation under Small Numbers Competition: Evidence from Land Auctions in Singapore (pdf)
by Joseph T.L. Ooi, C.F. Sirman, and Geoffrey K. Turnbull, September 2004
Keywords: Land auctions, price formation, small numbers competition
This paper examines the price formation process under small numbers competition using data from Singapore land auctions. The theory predicts that bid prices are less than the zero-profit asset value in these first-price sealed-bid auctions. The model also shows that expected sales price increases with the number of bidders both because each bidder has an incentive to offer a higher price and because of a greater likelihood that a high-value bidder is present. The empirical estimates are consistent with auction theory and show that the standard land attributes are reflected in auction prices as expected.
Comments and questions regarding this paper may be directed to Geoffrey Turnbull at gturnbull@gsu.edu.