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Declining Prices in the Sequential Dutch Flower Auction of Roses

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  • Gerard J. van den Berg

    ()
    (Vrije Universiteit Amsterdam)

  • Jan C. van Ours

    (University of Tilburg)

  • Menno P. Pradhan

    ()
    (Vrije Universiteit Amsterdam)

Abstract

According to basic models of sequential private value auctions of identical objects, consecutive prices are on average constant or rising. In empirical studies, prices are often found to decline. Several explanations have been put forward for this declining price anomaly. In this paper we analyze data on sequential Dutch auctions of roses from the largest flower auction in the world. We find that there is a substantial price decline and suggest that the presence of a buyer's option, whereby the winner of the first auction has the opportunity to buy the remaining units at the winning price, is a main determinant of the observed price decline. We advance on the empirical literature on sequential auctions by using formal panel data estimation techniques.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 99-074/3.

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Date of creation: 21 Sep 1999
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Handle: RePEc:dgr:uvatin:19990074

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Keywords: Sequential Auctions; Declining Prices; Buyer's Option;

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References

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  1. Flavio Menezes & Paulo Monteiro, 1997. "Sequential asymmetric auctions with endogenous participation," Theory and Decision, Springer, Springer, vol. 43(2), pages 187-202, September.
  2. von der Fehr, Nils-Henrik Morch, 1994. "Predatory Bidding in Sequential Auctions," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 345-56, July.
  3. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, Econometric Society, vol. 50(5), pages 1089-1122, September.
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  7. Jones, C. & Menezes, F. & Vella, F., 1996. "Auctions Price Anomalies: Evidence from Wool Auctions in Australia," Papers, Australian National University - Department of Economics 303, Australian National University - Department of Economics.
  8. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 25(2), pages 699-738, June.
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  10. Laffont, J.J., 1996. "Game Theory and Empirical Economics: The Case of Auction Data," Papers, Toulouse - GREMAQ 95.394, Toulouse - GREMAQ.
  11. GINSBURGH, Victor, . "Absentee bidders and the declining price anomaly in wine auctions," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1364, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Alan Beggs & Kathryn Graddy, 1997. "Declining Values and the Afternoon Effect: Evidence from Art Auctions," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 544-565, Autumn.
  13. Black, Jane & De Meza, David, 1992. "Systematic Price Differences between Successive Auctions Are No Anomaly," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 1(4), pages 607-28, Winter.
  14. Robert J. Weber, 1981. "Multiple-Object Auctions," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Bernhardt, Dan & Scoones, David, 1994. "A Note on Sequential Auctions," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 653-57, June.
  16. Gale Ian L. & Hausch Donald B., 1994. "Bottom-Fishing and Declining Prices in Sequential Auctions," Games and Economic Behavior, Elsevier, Elsevier, vol. 7(3), pages 318-331, November.
  17. McAfee R. Preston & Vincent Daniel, 1993. "The Declining Price Anomaly," Journal of Economic Theory, Elsevier, Elsevier, vol. 60(1), pages 191-212, June.
  18. Branco, Fernando, 1997. "Sequential auctions with synergies: An example," Economics Letters, Elsevier, Elsevier, vol. 54(2), pages 159-163, February.
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Cited by:
  1. Kleijnen, Jack P.C. & van Schaik, Frans D.J., 2011. "Sealed-bid auction of Netherlands mussels: Statistical analysis," International Journal of Production Economics, Elsevier, Elsevier, vol. 132(1), pages 154-161, July.
  2. Gerard J. van den Berg & Jan C. van Ours & Menno P. Pradhan, 2001. "The Declining Price Anomaly in Dutch Dutch Rose Auctions," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 1055-1062, September.

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