Abstract
This is the first study to test for a winner’s curse in a bubble market. Our hand-collected sample comprises the entire sequence of bids and the experience of the winning bidder at Irish residential real estate auctions, prior to the collapse of the bubble. Portfolios of practitioner-selected self-similar properties and a hedonic pricing model facilitate benchmark property price estimation. We show neither real estate investors nor owner occupiers shade auction bids to avoid the winner’s curse. Winning real estate investors, however, pay more for properties. Thus, real estate investors ride the wave of a property bubble and potentially exacerbate it.
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