Four essays on real estate auctions
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- NTNU Handelshøyskolen 
The long-standing tradition of households living in self-owned homes, makes the real estate market a popular topic in Norway. This is supported by the competitive nature of the relatively unusual method of selling homes, namely auctions. Using survey data and auction journals from the Norwegian real estate market, this thesis aims to fill gaps in the auction literature by offering empirical results on price drivers in residential auctions. What sets this apart from the existing literature, is the magnitude of investments and the formal rules and regulations of the auction process. Essay 1 studies whether boom or bust markets affect bidder behavior and finds that households in booming markets seem to believe that a more aggressive bidding strategy is advisable. Essay 2 and 3 study whether aggressive strategies in the form of high opening bids and jump bids, respectively, can intimidate bidders and yield lower prices. The two essays find that the intimidation effect is small and that aggressive strategies are associated with overall higher prices. Essay 4 studies whether the quasi-endowment effect, i.e., psychological attachment to the auctioned property before the transfer of ownership, affects auction outcomes. The essay finds that the effect positively influences the auction win-likelihood, and in some cases also prices. Buyers of residential property are often making the largest investment of their life and therefore need to be aware of the different strategic possibilities and likely outcomes of their bidding behavior in order to increase efficiency and reduce uncertainty and costs. Sellers who are aware of these strategic possibilities and outcomes, and perhaps also able to manipulate the auction design or parts of the process, could use this information to increase seller revenue. Finally, policymakers and regulators must evaluate whether an auction or auction-like format, where strategic and irrational behavior can influence prices and contribute to the house price cycle, is an overall adequately efficient pricing mechanism.