Community Property Auction, Nash Bidding Rule and China's Rural Economic Reform

Abstract

In this paper we present a model based on the auction theory for community properties and its possible application to China's economic reforms. We derive the Nash bidding rule for the first price sealed-bid auction of a community-owned object, and compare it with the bidding rule for auctions of a privately-owned object. Moreover, we argue that in the process of China's economic reforms, auctioning off the community-owned properties to private owners is the optimal way to achieve economic efficiency together with social equity. This paper has obvious implications for China's reforms relating to commercializing its rural land and other community property. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Asia Pty Ltd