SINGAPORE GOVERNMENT LAND SALES AND WINNER'S CURSE

Abstract

This thesis aims to uncover how bidders can minimize the effects of the “winner’s curse” under the Singapore Government Land Sales (GLS) context as this area of research has been less established empirically. A sample of 349 auctioned land parcels between 2000 and 2016 were gathered to conduct the analysis of the success and the post bidding behavior of the auction participants along with “winner’s curse” across different property sectors, locations and time frames. Subsequently, the analysis of post profits was executed to examine the post financial performance of the successful bidders to investigate the presence of “winner’s curse”. Through the empirical analysis, several interesting findings were made. Firstly, 38.32% of successful bidders suffered from reduced post auction profits. Additionally, 18.04% observed experienced a negative effect on their post profits due to overbidding while the remaining 20.38% represents the persistent effect of substandard companies who continue to suffer from poor performance despite making the right decisions. Secondly, there is a negative effect between the number of bids and “winner’s curse”. Lastly, there is a strong positive relationship between “winner’s curse” and the winning bidder’s overestimation of the common value of the auctioned item. To conclude, “winner’s curse” is a genuine issue that exist in Singapore GLS. Hence, to address this issue, this thesis identifies two bidding strategies to minimize the effects of “winner’s curse” - by participating in auctions with more competitors and where the common value of the auctioned item is high.