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If Winning isn't Everything, why do they keep Score? A Structural Empirical Analysis of Dutch Flower Auctions

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  • Gerard J. van den Berg

    ()
    (Vrije Universiteit Amsterdam)

  • Bas van der Klaauw

    ()
    (Vrije Universiteit Amsterdam)

Abstract

This paper provides a structural empirical analysis of Dutch auctions of houseplants at the flower auction in Aalsmeer, the Netherlands. The data set is unique for Dutch auctions in the sense that it includes observations of all losing bids in an interval adjacent to the winning bid. The size of this interval is determined by the speed of reaction of the auction participants, and as such these data are collectible due to neurological constraints on information processing. The data on losing bids are shown to be informative on the structural model determinants. The models are estimated using the Gibbs sampler with data augmentation. We take account of data limitations concerning the number of bidders. The estimation results are used to investigate whether actual reserve prices are optimal, and to determine the effects of reserve price changes.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-041/3.

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Date of creation: 30 May 2007
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Handle: RePEc:dgr:uvatin:20070041

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Web page: http://www.tinbergen.nl

Related research

Keywords: first-price auction; private value; speed of reaction; observing losing bids; data augmentation; Gibbs sampling; Markov Chain Monte Carlo; reserve price;

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References

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  1. Donald, Stephen G. & Paarsch, Harry J., 1996. "Identification, Estimation, and Testing in Parametric Empirical Models of Auctions within the Independent Private Values Paradigm," Econometric Theory, Cambridge University Press, vol. 12(03), pages 517-567, August.
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  4. Donald, S.G. & Paarsch, H.J., 1992. "Maximum Likelihood Estimation in Empirical Models of Auctions," UWO Department of Economics Working Papers 9211, University of Western Ontario, Department of Economics.
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  8. repec:cup:etheor:v:12:y:1996:i:3:p:517-67 is not listed on IDEAS
  9. Laffont, Jean-Jacques & Ossard, Hervé & Vuong, Quang, 1991. "Econometrics of First-Price Auctions," IDEI Working Papers 7, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Steven A. Matthews, 1995. "A Technical Primer on Auction Theory I: Independent Private Values," Discussion Papers 1096, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  13. Donald, Stephen G & Paarsch, Harry J, 1993. "Piecewise Pseudo-maximum Likelihood Estimation in Empirical Models of Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 121-48, February.
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  15. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
  16. Guerre, E. & Perrigne, I. & Vuong, Q., 1995. "Nonparametric Estimation of First-Price Auctions," Papers 9504, Southern California - Department of Economics.
  17. Elena Katok & Alvin E. Roth, 2004. "Auctions of Homogeneous Goods with Increasing Returns: Experimental Comparison of Alternative "Dutch" Auctions," Management Science, INFORMS, vol. 50(8), pages 1044-1063, August.
  18. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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Cited by:
  1. Yingyao Hu & Matthew Shum, 2007. "Estimating First-Price Auctions with an Unknown Number of Bidders: A Misclassification Approach," Economics Working Paper Archive 541, The Johns Hopkins University,Department of Economics.

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