A Study About Land Auction For Government Based On Reserve Price

This paper is a study about how to set the reserve price in auction theory,using the data collected by Thematic Database for Human-earth System,which is about the land auction in China,to analyze how government chooses the reserve price in land auction and the factors that may affect the value of reserve price.In auction theory,reserve price is irrelevant with the number of bidders under sealed-bid English auction,and it is only decided by bidders' private value function.If the bids during the auction are the public information for bidders,then such information may affect bidders' private value function,which in turn changes bidders' final bids and their revenue expectation.This paper summarizes the study related with auction theory and empirical analysis of auction data,researching the factors that affect reserve price and how they work based on the land auction data in China.Define two new variables called competition variable and premium,and then set up several econometric models to test and verify two main hypotheses proposed in this paper.According to the outcomes regressed by econometric models,we find that reserve price is correlated with the competition among bidders positively in land auction.Meanwhile,reserve price is correlated with premium positively,which means government will estimate the distribution of bidders' private value function based on historical auction data,and use such estimation to set a proper reserve price in order to maximize its expected revenue.Compared with other 5 usage of land,government tend to choose a lower value of reserve price for industrial land in transaction,in order to reach a lower bargain price.The innovation in this paper is that it chooses a different aspect to analyze the land auction in China,researching how government chooses the best reserve price in transaction which in order to improve its revenue and therefore the financial revenue of land.