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Price differences between successive auctions are no anomaly

de Meza, David and Black, Julia (1992) Price differences between successive auctions are no anomaly. Journal of Economics and Management Strategy, 1 (4). pp. 607-628. ISSN 1058-6407

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Abstract

Identical cases of wine are often auctioned one immediately after another. Ashenfelter (1989) reports that on average, the later lots fetch less. Such a systematic price difference seems anomalous, the more so because it is shown here that rational expectations imply not equal, but rising, prices. Risk aversion is an obvious way of reconciling the evidence with rational behavior. There is an alternative explanation. The auctions observed by Ashenfelter involved a buyer's option, whereby the first-round winner could purchase further cases at the same price. It is shown that this feature may both account for the observed price trajectory and raise seller revenue.

Item Type: Article
Official URL: http://www.blackwellpublishing.com/journal.asp?ref...
Additional Information: © 1992 Blackwell
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Law
Departments > Management
Research centres and groups > Centre for Analysis of Risk and Regulation (CARR)
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 06 May 2011 11:33
URL: http://eprints.lse.ac.uk/35756/

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