Golfing for Information: Informal Interactions and Economic Consequences
79 Pages Posted: 9 May 2019 Last revised: 30 Jun 2019
Date Written: April 26, 2019
This paper studies how company directors acquire information through informal interactions at golf courses to subsequently acquire land parcels at lower prices. Developers play golf together more often after the government makes a land sale announcement. The winning bids are 14% lower after interacting with other corporate directors, and the lower land prices allow the developers to sell new units 8% cheaper. However, the lower land prices by informed bidders generate negative spillovers on neighboring properties. Our results imply that the informal interactions enable developers to realize higher profits, while the government loses the land sale revenues.
Keywords: information efficiency, informal social interaction, winners’ curse, land auctions, corporate investment
JEL Classification: D71, D82, G31
Suggested Citation: Suggested Citation