Auction house pricing dynamics in the market for thoroughbred yearlings – a unique modelling approach

The consignment of European bloodstock assets involves commercial breeders consigning bloodstock assets for public auction through one of a small number of auction houses that dominate the market. Vendors typically consign such assets to the auction house and individual auctions they believe give the best chance of maximising the attainable price. The market is characterised by a perception that there is a premium pricing effect in consigning to certain auction houses and select sales. This paper seeks to determine if evidence exists to uphold that perception. Specifically, the paper examines the pricing dynamics and variables that exist in the UK and Ireland market for thoroughbred yearlings and tests the hypothesis that a pricing premium can be achieved by specific consignment strategies. The paper uses a unique modelling approach to capture the above dynamics. The paper seeks to identify the variables that influence auction prices achieved and control for these in determining the price effect of consigning through certain auction houses. The influence of sires has typically been viewed as the dominant effect on realised auction prices achieved in the market for thoroughbred yearlings. The market is characterised by a perception of a generally linear relationship between sire price and realised auction prices for thoroughbred yearlings. However, this paper seeks to more effectively model for the impact of dam on auction price outcomes. By using a unique modelling approach to measure the quality of dam, the paper seeks to more accurately capture the influential effect of maternal lineage on realised auction prices. Having isolated the dam effect, the findings of the paper will allow a more accurate assessment of the correlation between yearling auction price and auction consignment strategy and allow breeders a greater ability to select sales that maximise investment return.