If Winning Isn't Everything, Why Do They Keep Score? A Structural Empirical Analysis of Dutch Flower Auctions

53 Pages Posted: 23 May 2008

See all articles by Gerard J. van den Berg

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Bas van der Klaauw

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

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Date Written: June 2007

Abstract

This paper provides a structural empirical analysis of Dutch auctions of houseplants at the flower auction in Aalsmeer, the Netherlands. The data set is unique for Dutch auctions in the sense that it includes observations of all losing bids in an interval adjacent to the winning bid. The size of this interval is determined by the speed of reaction of the auction participants, and as such these data are collectible due to neurological constraints on information processing. The data on losing bids are shown to be informative on the structural model determinants. The models are estimated using the Gibbs sampler with data augmentation. We take account of data limitations concerning the number of bidders. The estimation results are used to investigate whether actual reserve prices are optimal, and to determine the effects of reserve price changes.

Keywords: data augmentation, first-price auction, Gibbs sampling, Markov Chain Monte Carlo, observing losing bids, private value, reserve price, speed of reaction

JEL Classification: C15, C51, C81, D44, L11, L15, Q13

Suggested Citation

van den Berg, Gerard J. and van der Klaauw, Bas, If Winning Isn't Everything, Why Do They Keep Score? A Structural Empirical Analysis of Dutch Flower Auctions (June 2007). CEPR Discussion Paper No. DP6323. Available at SSRN: https://ssrn.com/abstract=1136649

Gerard J. Van den Berg (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Bas Van der Klaauw

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6120 (Phone)
+31 20 444 6005 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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