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Hong Kong Land for Hong Kong People$
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Yue Chim Richard Wong

Print publication date: 2015

Print ISBN-13: 9789888208654

Published to Hong Kong Scholarship Online: September 2015

DOI: 10.5790/hongkong/9789888208654.001.0001

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How the Application List System Became the Winner’s Curse

How the Application List System Became the Winner’s Curse

(p.143) 20 How the Application List System Became the Winner’s Curse
Hong Kong Land for Hong Kong People

Yue Chim Richard Wong

Hong Kong University Press

The ALS suffered a classic problem of the “winner’s curse.” The central idea is that the true value of a site is uncertain because every developer has his or her own assessment, and none can be certain that it is correct. Developers make offers based only on their own assessments of the value of the site, and the developer with the highest valued assessment will trigger the auction. He or she is then obliged to make this offer or stand to lose the deposit. But while all the other developers know that developer has made the highest offer, he or she does not have information about their assessments of the site. This is the winner’s curse. Developers are of course aware of this problem even if they have not heard the term winner’s curse. To avoid falling into this trap, they submit offers that are lower than their own assessments. This explains why sealed offers submitted by developers are very low and often fail to trigger an auction. The conservative offers work against the seller’s interest. The winner’s curse backfires and becomes the “seller’s curse.”

Keywords:   Hong Kong, Housing, Housing policy, Public Housing, Politics, Social mobility, Population, Economics, Growth

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