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Aggressive bidding strategies in real estate auctions – a structural equation modelling (SEM) approach

Simen Dalland (NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway)
Randi Hammervold (NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway)
Henrik Tangen Karlsen (NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway)
Are Oust (NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway)
Ole Jakob Sønstebø (NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway)

Journal of European Real Estate Research

ISSN: 1753-9269

Article publication date: 27 May 2021

Issue publication date: 2 August 2021

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Abstract

Purpose

This paper aims to study aggressive bidding strategies in real estate auctions – a structural equation modelling (SEM) approach.

Design/methodology/approach

The authors use two data sets to study aggressive bidding strategies. First, the results from a survey with 1,803 participants examining real estate auctions are used to identify bidding strategies and related motivations. Second, the authors apply SEM by using data from 1,078 exclusive auction journals from real estate sales in Norway to study both the direct and indirect price effects of the bidding strategies.

Findings

The authors define four aggressive bidding strategies: high opening bid, high bid increase (jump bids), short acceptance deadline and short response time. The authors find that all four strategies yield a higher sales price. Bidders can actively influence the behaviour of the other participants and cool the potential auction fever, thus reducing the final price premium.

Originality/value

This paper gives households, investors and policymakers a better understanding of how bidding strategies affect real estate auctions and the final price.

Keywords

Citation

Dalland, S., Hammervold, R., Karlsen, H.T., Oust, A. and Sønstebø, O.J. (2021), "Aggressive bidding strategies in real estate auctions – a structural equation modelling (SEM) approach", Journal of European Real Estate Research, Vol. 14 No. 2, pp. 229-245. https://doi.org/10.1108/JERER-09-2020-0049

Publisher

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Emerald Publishing Limited

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