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Declining Prices in the Sequential Dutch Flower Auction of Roses

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Author Info

  • 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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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, 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, vol. 91(4), pages 1055-1062, September.

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