Declining prices in the sequential Dutch flower auction of roses
AbstractAccording to basic models of sequential private value autions 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 data estimation techniques.
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Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0040.
Date of creation: 1999
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Sequential auctions; declining prices; buyers' option;
Other versions of this item:
- Gerard J. van den Berg & Jan C. van Ours & Menno P. Pradhan, 1999. "Declining Prices in the Sequential Dutch Flower Auction of Roses," Tinbergen Institute Discussion Papers 99-074/3, Tinbergen Institute.
- Berg, G. van den & Ours, J.C. van & Pradhan, M.P., 1999. "Declining Prices in the Sequential Dutch Flower Auction of Roses," Discussion Paper 1999-52, Tilburg University, Center for Economic Research.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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