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Tenant Favoritism and Right of First Refusals in Farmland Auctions: Competition and Price Effects

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  • Lars Isenhardt
  • Stefan Seifert
  • Silke Hüttel

Abstract

Rights of first refusals (RFRs) granted to tenants in land privatization auctions enable them to purchase their leased land by accepting the highest bid. RFRs may deter bidders and incentivize non–right holders to adjust their bidding. We conjecture that tenant favoritism with RFRs reduces competition and thus sales prices at the expense of the public sellers. To test the conjectures, we compile a data set of land auctions by two privatization agencies in eastern Germany, one favoring tenants along with an RFR, between 2007 and 2018. Double robust matching results indicate RFR-related reductions in the number of bidders and prices.

Suggested Citation

  • Lars Isenhardt & Stefan Seifert & Silke Hüttel, 2023. "Tenant Favoritism and Right of First Refusals in Farmland Auctions: Competition and Price Effects," Land Economics, University of Wisconsin Press, vol. 99(2), pages 302-324.
    • Handle: RePEc:uwp:landec:v:99:y:2023:i:2:p:302-324
    Note: DOI: https://doi.org/10.3368/le.080721-0091R1
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    More about this item

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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