An experimental Study of Auction and Tender Behaviour

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.