First-Price Sealed-Bid Tender versus English Open Auction: Evidence from Land Auctions

Abstract

This paper compares whether the first-price sealed-bid tender or the ascending English open auction generates higher revenue for the seller. Using a unique data for land sales and accounting for the presence of an endogenous discrete mechanism choice variable, our results show that the first-price sealed-bid tender generates a lower land price, in the range of 1.2% to 9.6%, than the English open auction. Our results validate the theoretical prediction that open auctions result in higher prices because bidders can infer other bidders’ information by observing their bids in the common value auction paradigm.

Keywords: first-price sealed-bid tender, ascending English auction, vacant land