Competitive Bidding in Urban Land Auctions with Incentive Contracts

This paper formulates a game theoretical model of urban land auctions with incentive contracts. The auction is organized by the government seeking to exercise control over house prices. The firm type, a parameter that reflects efficiency of a firm, is private information to all firms, and utility functions of participants take general forms. This paper shows that the Bayesian Nash equilibrium firm bidding strategies are monotonic in firm types.