Assessing the Role of Ordering in Sequential English Auctions – Evidence from the Online Western Video Market Auction

In a sequential English auction, where multiple homogenous objects are offered, it is often found that the price tends to decrease over the course of the auction, which is referred to as the “declining price anomaly”. This article studies the price trend in a sequential online live cattle auction. Motivated by the fact that in an English first‐price auction, the winning price is the maximum among all the bids offered, we examined the existence of the declining price anomaly by introducing the Generalized Extreme Value theory framework, and nesting it within a hedonic regression, where the price of cattle relates to the market values for cattle attributes. Empirical results indicate that the unit price difference between the first and the last lot sold ranges from $7.82 to $2.31, depending on the average animal weight in that lot. On average, the unit price of a stocker cattle lot sold in the last position of a typical sale is $5/cwt (or 3%) less than if it was sold in the first place, regardless of the scale of the sale and keeping all other factors constant. Based on the theoretical framework developed by Brendstrup and Paarsch (2006), we find that the buyer's maximum valuation on the subsequent object actually declines as he wins more objects, which provides a plausible explanation for the declining prices anomaly in sequential auctions.