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This paper studies Anglo-Dutch premium auctions used in the secondary market for financial securities in eighteenth-century Amsterdam, Europe's financial capital at the time. An Anglo-Dutch premium auction consists of an English auction followed by a Dutch auction, with a cash premium paid to the winner of the first round regardless of the second-round outcome. To rationalize the introduction and continued use of this auction format, we need to determine whether bidding behavior was consistent with equilibrium play. We model this auction format theoretically, and show that the likelihood of a bid in the second round should be higher when there is greater uncertainty about the value of the security being sold. We then test this prediction on data from 16,854 securities sold at auction on 469 days over an 18-year period in the late 1700s; using several different proxies for the uncertainty of a given security's value, we find support for this theoretical prediction.

In premium auctions, the highest losing bidder receives a reward from the seller. This paper studies the private value English premium auction (EPA) for different risk attitudes of bidders. We explicitly derive the symmetric equilibrium for bidders with CARA utilities and conduct an experimental study to test the theoretical predictions. In our experiment, subjects are sorted into risk-averse and risk loving groups. We find that revenues in the EPA are significantly higher when bidders are risk loving rather than risk averse. These results are partly consistent with theory and confirm the general view that bidders' risk preferences constitute an important factor that affects bidding behavior and consequently also the seller's expected revenue. However, individual subjects rarely follow the equilibrium strategy and as a result, revenue in our experiment is lower than in the symmetric equilibrium.

We estimate the effect of ordering by value on revenues in sequential art auctions held by Sotheby's and Christie's. We exploit a pre determined rotation of which of these two houses holds their auction first during auction week in New York City. When the house that goes first has relatively expensive paintings compared to the other house, we find that the sale premium for the week is around 21% higher relative to the mean sale premium, and the fraction of paintings sold during the week is around 11% higher. We provide evidence that this is due to an anchoring effect.

PurposeThis paper aims to identify the imbedded option value in price of auctioned land in Hong Kong, and to propose a more accurate valuation method in predicting land price.Design/methodology/approachBased on records of land auctions and property transactions during two periods of very different market conditions, land prices are estimated using the traditional hedonic pricing method as well as the option model modified from Quigg. The results are compared to deduce whether there is any imbedded option value, thus concluding whether the option model facilitates a more accurate valuation of land prices.FindingsThis study concludes that land auction prices have embedded option value in waiting to develop land. Option premiums increase with implied volatilities, which go up during market downturns, suggesting that developers place higher value on the option to develop during recessions.Research limitations/implicationsThe accuracy of the analysis may have been compromised by the limited number of land auctions conducted and the difficulties in inferring the value of multi‐ownership residential buildings from sample transactions of their constituent individual units. Future research will benefit from a larger sample of transactions.Practical implicationsThis paper illustrates that real option models provide the property industry with a valuation tool that addresses the concern arising from the irreversibility of investment decisions.Originality/valueThe study finds out the option premiums of vacant land in Hong Kong, lending empirical support to the application of option‐based models for more accurate land valuation under different market conditions.

AbstractWe test the influence of information asymmetry on the premium paid for an acquisition. We analyze mergers and acquisitions as English auctions. The theory of dynamic auctions with private and common value predicts that more informed bidders may pay a lower price. We test that prediction with a sample of 1,026 acquisitions in the United States between 1990 and 2007. We assume that blockholders of the target's shares are better informed than other bidders because they possess privileged information on the target. Our empirical results show that blockholders pay a much lower premium than do other buyers

With increased interest in new transit systems for congestion relief, or pollution mitigation and limitations on the amount of funding available, governments and planners are looking at many new ways to finance transit infrastructure. One method being pursued is capturing some of the value conferred to sites when transit is introduced. This paper discusses a proposal to capture that value through a market based bid process, examines means of overcoming several related stakeholder issues, and discusses potential pilot project sites. As early as 1826, German economist Johann Heinrich von Thünen developed a theory that transport adds a measure of accessibility and value to a site. Research has continued for almost two centuries and UC Berkeley professor Robert Cervero has conducted several studies that identified a ten percent premium for locations that have enhanced accessibility due to transit's proximity. Capturing this value, though rare, is typically achieved through standard local finance mechanisms like property tax levies, assessment districts, and TIF. These methods have seen limited implementation as each presents significant issues for policymakers, transit operators, and the public, when compared to alternative grant funds from state or federal transport departments. In hopes of finding a new value capture alternative, this paper explores the possibility of a market-based bid system where property owners volunteer a portion of the anticipated increase in value to deliver the property enhancing transit infrastructure. These "bids" would help determine the optimal location for transit based on a cost/benefit analysis of various route and station alignments. This concept was originally developed in the author's graduate thesis research at the Department of City and Regional Planning. Subsequent coursework outlined the process, identified stakeholders, and proposed techniques to mitigate potential stakeholder concerns. Important conclusions include identifying a need for a non-profit oversight entity to coordinate implementation and a focus on proposed transit systems that do not qualify for federal funding grants.

With increased interest in new transit systems for congestion relief, or pollution mitigation and limitations on the amount of funding available, governments and planners are looking at many new ways to finance transit infrastructure. One method being pursued is capturing some of the value conferred to sites when transit is introduced. This paper discusses a proposal to capture that value through a market based bid process, examines means of overcoming several related stakeholder issues, and discusses potential pilot project sites. As early as 1826, German economist Johann Heinrich von Thünen developed a theory that transport adds a measure of accessibility and value to a site. Research has continued for almost two centuries and UC Berkeley professor Robert Cervero has conducted several studies that identified a ten percent premium for locations that have enhanced accessibility due to transit's proximity. Capturing this value, though rare, is typically achieved through standard local finance mechanisms like property tax levies, assessment districts, and TIF. These methods have seen limited implementation as each presents significant issues for policymakers, transit operators, and the public, when compared to alternative grant funds from state or federal transport departments. In hopes of finding a new value capture alternative, this paper explores the possibility of a market-based bid system where property owners volunteer a portion of the anticipated increase in value to deliver the property enhancing transit infrastructure. These "bids" would help determine the optimal location for transit based on a cost/benefit analysis of various route and station alignments. This concept was originally developed in the author's graduate thesis research at the Department of City and Regional Planning. Subsequent coursework outlined the process, identified stakeholders, and proposed techniques to mitigate potential stakeholder concerns. Important conclusions include identifying a need for a non-profit oversight entity to coordinate implementation and a focus on proposed transit systems that do not qualify for federal funding grants.

Governments as well as private firms face the risk that a contractor goes bankrupt before the completion of the work. In such an environment the possibility to declare bankruptcy makes bidders in a procurement auction bid more aggressively. Among other results we show that revenue equivalence breaks down and that in contrast to the standard auction theory, multi-sourcing, rationing, and other means to soften competition may fare better than a standard auction. We also discuss commonly used methods of how to avoid ruinous bidding and demonstrate that these might fare quite badly. Also, in contrast to the existing literature, cost-plus contracts might be no longer inefficient. In a second step, we extend our analysis to international trade theory and show that the practice of supporting domestic firms with price preferences against international competition leads to the opposite result as intended, namely more bankrupt domestic firms. The last part of this thesis deals with the investigation whether the introduction of compulsory surety bonds mitigates the problem of risky bidding. Since the issuers of the bond are specialized in screening the potential contractors they can evaluate contractors' risks. Hence, they charge a risk-adjusted premium as a compensation for issuing the required surety bond. Our result is that if the bond is priced fairly, full insurance or even overinsurance is optimal. If the surety is priced unfairly, full insurance might be optimal. ; Das größte Problem des öffentlichen und des privaten Auftragswesens sind Konkurse der Auftragnehmer. Diese stellen für die Auftraggeber ein beträchtliches Risiko dar und führen zu immensen Folgekosten. Konkurse von Auftragnehmern entstehen, wenn diese über wenig finanzielle Reserven verfügen und in ihrer Haftung beschränkt sind, was zu einem aggressiverem Bietverhalten führt. In diesem Beitrag wird unter anderem gezeigt, dass das Revenue-Equivalence-Theorem nicht länger gilt und dass multi-sourcing, Rationierung und andere Methoden, die den Wettbewerb ...