The declining price anomaly in sequential auctions with asymmetric buyers: Evidence from the Nephrops norvegicus market in France
Résumé
The declining price anomaly for sequential sales of identical commodities challenges the outcome of auction theory predicting constant prices within the same day. This phenomenon is more widespread than expected from rational bidders competing in repeated trades for homogeneous goods. Among the most common hypotheses explaining this phenomenon stands the dual value of goods including a risk premium (the fear of not being served) in early transactions. The presence of asymmetry between buyer groups and a shortage effect may amplify the risk perception of bidders and strengthen the declining price anomaly. This hypothesis is tested in the present research on a fish market in France (Nephrops norvegicus –or langoustines- sold alive through a descending auction system in Lorient). A clear pattern of decreasing prices is evidenced for periods of higher demand (and/or lower supply), but does not concern all buyer groups similarly.
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