The demand for agricultural land and strategic bidding in auctions |
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Authors: | Peter F. Colwell Abdullah Yavaş |
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Affiliation: | (1) Office of Real Estate Research, University of Illinois, 61801 Urbana, IL;(2) Smeal College of Business, The Pennsylvania State University, 16802 University Park, PA |
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Abstract: | A unique feature of land auctions is that the same land is auctioned twice; first the land is broken into tracts and each tract is auctioned individually. Then, the tracts are reassembled and auctioned as a whole parcel. After the two auctions are completed, the seller chooses the one that generates a higher revenue. The main purpose of this paper is to provide an explanation of why such an auction design is employed to sell farmland. We also show that this feature of land auctions leads to interesting interaction among the bidding strategies of the players in each of the two auction stages. |
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Keywords: | Agricultural land auctions subgame perfect equilibrium bid shading efficiency |
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