Efficiency Improvement through outsourcing and incentivizing: Evidence from Judicial Auctions in China

Using the judicial auction outsourcing reform in China as a natural experiment, this study examines whether public service outsourcing improves efficiency in foreclosure auctions. After outsourcing, the auction success rate increased by 2.4%, which only occurred under the revenue-sharing contract. The improvement was driven by reduced search frictions, better information disclosure of auctioned items and higher trust in private companies, not by lower auction prices or lower participation thresholds that may harm the principals. Between 2015 and 2024, if judicial auctions were fully outsourced to judicial auxiliary agencies, it would generate an additional benefit of 8.27 billion CNY for debtors.