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Declining Prices in the Sequential Dutch Flower Auction of Roses

Gerard van den Berg, Jan van Ours () and Menno P. Pradhan ()
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Menno P. Pradhan: Vrije Universiteit Amsterdam

No 99-074/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in an article in the American Economic Review (2001). Volume 91, pages 1055-1062. According to basic models of sequential private value auctions 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 panel data estimation techniques.

Keywords: Sequential Auctions; Declining Prices; Buyer's Option (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 1999-09-21
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