Strategic Sequential Bidding for Government Land Auction Sales - Evidence from Singapore

Abstract

This paper studies the extent to which equilibrium land auction prices are pushed up sequentially due to strategic bidding behaviors in government land auction sales. Using a unique data set that covers the universe of tendering prices submitted by all developers for all residential land auction sales in Singapore, we find that a tenderer's bids are significantly higher where there was a previous land parcel sold within two years and located within four kilometers.The identified price margin decreases with time and we find that the incumbent winner of a previous auction is more likely to participate in subsequent nearby land sales as compared to the second-highest bidder of the same auction. However, it does not necessarily win the subsequent sites. We argue that the incumbent deliberately bids up the subsequent land prices to gain pricing advantages to their own parcels.

Keywords: Land sale auctions; Strategic sequential bidding; Land price; Housing price; product differentiation

JEL Classification: D43; D44; L13; R31; R38