Are Auction Price Premiums Real? Evidence from Farmland Sales

Farmland auctions are widely used, particularly for high-quality parcels, yet their effect on sale price remains unclear. Using detailed transaction data, we show that although higher-quality ground is more likely to be sold via auction, auctions are associated with lower prices on average after controlling for observable characteristics. We reconcile this apparent contradiction by demonstrating that auction performance is highly dependent on land quality: auctions perform relatively well for higher and homogeneous quality, easily observable parcels but generate worse outcomes for lower-quality or more ambiguous land. These findings highlight that auctions are not universally “effective”, but instead operate as a context-dependent sales mechanism shaped by the underlying characteristics of the asset.