Optimal reserve prices for land auctions in Eastern Germany

Marlene Kionka*, Oliver Muβhoff, Matthias Ritter, Jan Philip Rado Uhlemann, Martin Odening

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Scopus)

Abstract

Privatization auctions are seen as culprit for rising prices in eastern Germany. This study aims to analyse whether privatization auctions could have earned even higher revenues by setting optimal reserve prices. For this purpose, a structural estimation approach is applied to determine reserve prices and to compare the resulting expected revenues with actual revenues. The data set includes land auctions in eastern Germany from 2005–2019. The empirical results illustrate that room for increasing revenues exists, but reserve prices would be required to be higher than actual land prices. A potential consequence of high reserve prices is the risk of delays in the privatization process.

Original languageEnglish
Pages (from-to)574-578
JournalApplied Economics Letters
Volume31
Issue number6
Early online date2 Nov 2022
DOIs
Publication statusPublished - Mar 2024

Keywords

  • first price sealed bid auctions
  • Land prices
  • optimal reserve prices
  • privatization

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