Journal of Real Estate Finance and Economics, 17:3, 219±232 (1998)
# 1998 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
Simultaneous Pooled Auctions
FLAVIO M. MENEZES
Department of Economics, Faculty of Economics and Commerce, Australian National University, Canberra,
ACT 0200, Australia Email: Flavio.Menezes@anu.edu.au
PAULO K. MONTEIRO
Instituto de Matema
tica Pura e Aplicada, Estrada Dona Castorina 110, Jardim Bota
nico, Rio de Janeiro, RJ,
CEP 22460, Brazil Email: email@example.com
Suppose a seller wants to sell k similar or identical objects and there are n > k potential buyers. Suppose that each
buyer wants only one object. In this case, we suggest the use of a simultaneous auction that would work as
follows. Players are asked to submit sealed bids for one object. The individual with the highest bid chooses an
object ®rst; the individual with the second-highest bid chooses the next object; and this process continues until the
individual with the kth highest bid receives the last object. Each individual pays the equivalent to his or her bid.
When objects are identical, we show that the proposed auction generates the same revenue as a ®rst-price sealed-
bid sequential auction. When objects are perfectly correlated, there is no known solution for sequential auctions,
whereas we can characterize bidding strategies in the proposed auction. Moreover, the proposed auction is
optimal (given an appropriately chosen reserve price), and it may be easier and cheaper to run than a sequential
Key Words: simultaneous auctions, revenue equivalence, condominium auctions
In some areas of the US and in most parts of Australia auctions are a primary method for
selling real estate. According to Kravets (1993), the number of properties sold by auction
``is growing at a geometric rate.'' While auctions were previously viewed as a way to
dispose of distressed properties, the current view now is that real estate auctions are ``an
acceptable and pro®table way for the real estate person to do business'' (Sherman and
Bussio, 1994). Although precise numbers are not available, it has been said that real estate
sold at auction in 1988 reached more than $2.5 billion (``Board of Realtors Sold on This
Good Bid,'' 1988).
This expansion in the use of auctions to sell real estate has been accompanied by a
diversi®cation of the auction terms being used. Kravets (1993) distinguishes between
pooled unit bidding
and sequential bidding.
Vanderporten (1992) reports the use of a
particular pooled auction in the sale of similar condominium units and of like-sized
adjoining tracts of land. In this auction, a lot is formed with all items for sale. Oral bids are
submitted with the highest bidder winning the right to choose one item from among the
objects in the lot. A second auction follows for the right to choose another object from the
remaining unclaimed objects. This procedure is repeated until all objects are disposed.