Opening Bid Strategies in English Auctions

Abstract

Existing residential homes in Norway are sold by English auctions. This provides an exclusive opportunity to examine opening bid strategies for high-valued objects. Using unique data from surveys and auction journals, we find that the direct price effect of a high opening bid is stronger than the intimidation effect. A higher opening bid is associated with an overall higher price premium in OLS and fixed-effects regressions. Our results have implications for both buyers and sellers in situations where auctions and auction-like sales mechanisms are used, and for policy makers regarding auction process rules and market regulations.