Sealed-Bid Auctions and Fixed Price Sales : Seller Choice in Housing Markets

The choice of marketing system used to allocate property rights is important across many industries. In Scotland, two systems of marketing real property co-exist: fixed price, where homes are listed for sale at a fixed price on "first-come-first-serve" basis, and offers over, which is a sealed-bid auction format where the seller indicates a floor for bids. Using 4,780 detached housing sales between 1984 and 2002, this paper explores potential price effects of the seller's choice of marketing system. Specifically, a log price model is estimated based on transactions under both marketing systems acknowledging endogeneity in the choice of marketing system. The empirical procedure reveals that sellers select the marketing system which results in the highest predicted price for their property