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The Journal of Real Estate Finance and Economics

, Volume 58, Issue 1, pp 111–132 | Cite as

Does Joint Bidding Reduce Competition? Evidence from Hong Kong Land Auctions

  • Jianfu ShenEmail author
  • Frederik Pretorius
  • Xin Li
Article

Abstract

This paper analyses firms’ bidding behavior in auctions for development land in Hong Kong. The real estate market in Hong Kong is considered to be oligopolistic as it is dominated by a few top real estate firms, which have strong financial strength/development capacity and large land banks. Joint bidding is used by other real estate firms (“large” firms) to pool resources/capital in order to compete with the top firms. We test whether joint bidding increases or decreases the level of competition in land auctions, using land auction data in Hong Kong from 1991 to 2011. We find that large real estate firms are more likely to be successful than top firms at auctions when bidding jointly. However, joint bidding/winning does not harm competition as reflected by the number of bids, bids per bidder and number of bidders. Land prices also increase significantly in auctions won by joint bidders or alliances of large developers. Our results suggest that joint bidding enhances competition by allowing large firms to act strategically by pooling their resources and act aggressively to compete with the top firms.

Keywords

Joint bidding Alliance Competition Land price Bids 

Notes

Acknowledgements

The authors are grateful to the Editor, Professor C.F. Sirmans, and one anonymous referee for their helpful comments and valuable suggestions.

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Department of Economics and FinanceHang Seng Management CollegeShatinHong Kong
  2. 2.Asian Institute of International Financial LawThe University of Hong KongPokfulam RoadHong Kong
  3. 3.School of ArchitectureSouthern China University of TechnologyGuangzhouChina

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