Is there a risk of a winner’s curse in farmland auctions?

Stefan Seifert and Silke Hüttel

European Review of Agricultural Economics, 2023, vol. 50, issue 3, 1140-1177

Abstract: We test the assumption that bidders in farmland auctions have private valuations, a necessary condition for auction efficiency. We apply the test of Haile et al. (2003) to farmland auctions in Eastern Germany covering the price boom 2007–2020. To disentangle valuations from observed and unobserved heterogeneity, we develop a new approach relying on professional appraisals of the land. Based on our rich identification strategy, validation and robustness checks, we reject pure private valuations. We conclude that the presence of a common value in bidders’ valuations is very likely resulting in potentially inefficient land privatisation auctions and a winner’s curse.

Keywords: farmland auctions; common values; unobserved heterogeneity (search for similar items in EconPapers)
Date: 2023
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