Auction Structure, Bidding Behavior and Urban Land Price: New Evidence From Two-Stage Land Auctions

Urban land in China is state-owned and primarily allocated by the government via a two-stage auction process. Compared with auction mechanisms in other markets and countries, China’s two-stage land auctions have a unique structure in that the first stage is an open-bid survival auction with a fixed deadline. This paper uses bid history data for land auctions in Beijing to analyze jump bidding behavior, investigating its effects on subsequent bidding and the final sale price achieved. We find that jump bidding increases the likelihood that the next bid is also a jump bid and that it accelerates the bid submission process in the first stage. Furthermore, jump bidding generates two-way effects on the land price. While it prevents lower-value bidders from entering the second stage, it can also trigger a ‘jump war’ between higher-value bidders. The findings in this paper suggest alternative bidding strategies within the two-stage auction structure and also provide an auction-based behavioral explanation for urban land price dynamics in China.