Behavioral Auction Mechanism of Construction Land Quota and Construction Land With Location Selection

Reasonable pricing of construction land quota (CLQ) and construction land (CL) is conducive to improving the enthusiasm for farmers’ land reclamation to generate more quotas. Existing literature points out that the current pricing mechanism based on the quota reclamation cost of construction land is not sufficient to protect the rights and interests of farmers in the process of withdrawing from homestead land. However, they have not conducted in-depth research on the quota pricing mechanism based on the characteristic value of the quota. This study constructs a two-stage sequential first-price auction (SFPA) behavioural model with regret, and studies the effect of regret on the CLQ and CL bidding price. Through theoretical and numerical analysis, we found that developers’ regret for quota winning and land failure decreased the quota bidding price and farmers’ income. By contrast, developers’ regret for quota failure and land winning will increase the quota bidding price and farmers’ income. The quota bidding price and farmer income with location selection are higher than those without selection. The quota bidding price and farmer income with location selection decrease as the number of developers increases. Therefore, the optimal decision of the government is to make use of the quota loser’s regret in the first stage by revealing the highest price of the quota, and to make use of the land winner’s regret in the second stage by revealing the second highest price of the land, thereby improve the supply of the quota and farmers’ income. The government provides developers with the location selection to further increase the quota bidding price and farmers’ income. Our new theoretical model is suitable for pricing CLQ and CL by effectively revealing developers’ private information.