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Are Auction Price Premiums Real? Evidence from Farmland Sales

Author

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  • Chandio, Rabail
  • Lence, Sergio
  • Zhang, Wendong

Abstract

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.

Suggested Citation

  • Chandio, Rabail & Lence, Sergio & Zhang, Wendong, 2026. "Are Auction Price Premiums Real? Evidence from Farmland Sales," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404337, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404337
    DOI: 10.22004/ag.econ.404337
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    References listed on IDEAS

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    1. Geir Sogn-Grundvåg & Dengjun Zhang, 2023. "Auction versus direct sale: the effect of buyers and sellers on prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 50(1), pages 84-114.
    2. Matthew Gentry & Tong Li, 2014. "Identification in Auctions With Selective Entry," Econometrica, Econometric Society, vol. 82(1), pages 315-344, January.
    3. Yuen Leng Chow & Isa E. Hafalir & Abdullah Yavas, 2015. "Auction versus Negotiated Sale: Evidence from Real Estate Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 432-470, June.
    4. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    5. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    6. Peyman Khezr, 2018. "Why Sellers Avoid Auctions: Theory and Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 163-182, February.
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    8. Christopher J. Mayer, 1993. "A model of real estate auctions versus negotiated sales," Working Papers 93-3, Federal Reserve Bank of Boston.
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