Declining prices in the sequential Dutch flower auction of roses

Gerard J. van den Berg, Jan C. van Ours and Menno P. Pradhan
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Gerard J. van den Berg: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 40, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: According 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.

Keywords: Sequential auctions; declining prices; buyers' option (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (2)

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