PARAMETERS AFFECTING THE WINNERS' CURSE IN URA LAND SALES

Abstract

Winner's curse is a phenomenon in a competitive bidding context where the participants are unaware of the estimations of their rivals. When the winner turns out to be a 'loser' due to the excessively high bid tendered, the winner's curse is said to occur. This dissertation examines the winner's curse in the land tenders administered by Singapore Urban Redevelopment Authority (URA) from 1991 to 1996. Using a sample set of sixty-five tender exercises from the period, the study evaluates the parameters which past researchers posited as the main causes of winner's cause. This set of parameters includes uncertainty of bid-item's value, size of bidding population and experience of the bidders. It also examines the validity of the findings of past researchers and their applicability in the local context. Results show that the winner's curse can be affected by plot ratio, land area, size of bidding population or experience of bidders, depending on the types of developments. Ascertaining the critical factors that lead to winner's curse is crucial for diagnosing when, and how, winning bidders fall in the trap of the winner's curse.