Auction Price Formation with Costly Occupants: Evidence Using Data from the Osaka District Court

Takako Idee, Shinichiro Iwata and Teruyuki Taguchi
Additional contact information
Takako Idee: Faculty of Economics, Seikei University
Shinichiro Iwata: Faculty of Economics, University of Toyama
Teruyuki Taguchi: National Federation of Credit Guarantee Corporations

No CIRJE-F-593, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Foreclosure properties sold at Japanese judicial auctions are delivered to buyers with an unclear title when occupants exist, because the foreclosure laws protect occupants from compulsory execution of auctions. The existence of occupants theoretically affects the auction price through two channels. First, it affects the reserve price, and this changes in auction price. Second, the number of bidders changes in response to changes in the reserve price that is controlled by occupants, and this changes the auction price. Using data from the Osaka District Court, we empirically find that the existence of occupants in properties reduces the auction price through two channels.

Pages: 22pages
Date: 2008-09
New Economics Papers: this item is included in nep-gth and nep-mkt
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