Abstract:
An experimental laboratory simulation of property sales and management was used to
study auction and tender bidding behaviour. The simulation creates a model property
investment environment where subjects have the opportunity to purchase property, but
must then manage it profitably to succeed.
The experiment revealed that in a well-informed, mildly optimistic market, tender sales
returned prices close to rational capitalised values, whereas auction sales returned
premiums. Moreover, when sets of properties are auctioned in succession in a single
auction session, there appears to be a learning effect on prices. The paper relates the
experiment to the developing literature on the behavioural study of property auctions.
