• norsk
    • English
  • English 
    • norsk
    • English
  • Login
View Item 
  •   Home
  • Handelshøyskolen BI
  • Student papers
  • Master of Science
  • View Item
  •   Home
  • Handelshøyskolen BI
  • Student papers
  • Master of Science
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Seniority purchase option in the norwegian housing market, and its effect on auction dynamics

Tengesdal, Øystein; Pedersen, Mads Bae
Master thesis
Thumbnail
View/Open
1757697.pdf (2.152Mb)
URI
http://hdl.handle.net/11250/2477546
Date
2017
Metadata
Show full item record
Collections
  • Master of Science [1555]
Abstract
In our thesis, we study the effects of the presence of “forkjøpsrett”, or seniority

purchase option (SPO), on the market for cooperative apartments. Norwegian

housing is transacted via English auctions, and we hypothesize that the presence of

SPO gives incentives for bidders to alter their behavior. The SPO gives members

of a cooperative (co-op) the right to buy for-sale apartments at the price determined

by the public auction without having to participate in the auction themselves. We

argue that this creates an incentive for buyers with SPO to not participate in the

auction, and rather exercise their SPO after the fact at a lower price than if they

were to participate. Consequentially, this creates an incentive for the remaining

bidders to bid more aggressively in order to deter (potential) buyers with seniority

from exercising their SPO. To study this, we collect transaction level data from

2015 and 2016, containing hedonics and full bidding logs, as well as information

on ownership structure. This enables us to separate between co-ops with and

without SPO. As a proxy for aggressive bidding behavior, we study the occurrence

of overbids. This we define as one unique bidder placing two consecutive bids,

without it being as a response to bids placed by other bidders, implying that he

effectively overbids himself. We also study the likelihood of an apartment being

transacted via bargaining (one bidder) as opposed to an auction (more than one

bidder). Results from analyzing these auction characteristics serve as evidence for

our hypothesis. We show that overbidding is positively correlated with a higher

sales price, controlling for observables, and that it occurs more often when SPO is

present. However, SPO co-ops are more often transacted via bargaining, which has

a negative effect on price, controlling for observables. Therefore, when testing the

overall price effect of the SPO, we find no significant effect. The two countervailing

price effects of the SPO turn out to cancel each other out. Given our result, we argue

that SPO presence creates additional uncertainty for agents participating in the

auction, resulting in a potentially less efficient auction format.
Description
Masteroppgave(MSc) in Master of Science in Business, Economics - Handelshøyskolen BI, 2017
Publisher
BI Norwegian Business School

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit
 

 

Browse

ArchiveCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDocument TypesJournalsThis CollectionBy Issue DateAuthorsTitlesSubjectsDocument TypesJournals

My Account

Login

Statistics

View Usage Statistics

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit