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Article: Do Reserve Prices Yield Reference Effects in Korean Residential Court Auctions? Author: Han-Jang No, Dai-Won Kim, Jung-Suk Yu Abstract: This study examines whether the reserve prices in residential court auctions in Seoul, Korea result in reference effects by influencing the amount of the successful bid. We also explore whether the sensitivity of these reference effects differ by housing size and assess whether the expected sold rate can be forecasted based on different reserve price levels. The panel data estimates presented herein shows that reserve prices positively influence final transfer prices; in other words, reserve prices yield strong reference effects. The results of the OLS regressions show that the sensitivity of reference effects differs by housing size, albeit in an inconsistent manner. Finally, the response surface methodology analysis signifies that different reserve prices lead to varying reference effects by localities across the Seoul metropolitan area. This technique thus provides courts and bidders with a method for forecasting potential sold rates, which would be useful for decision making in auctions.
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