Abstract
Using data from dairy cattle auctions plus independent appraisals of the cattle sold, this paper is able to verify the existence of the “declining price anomaly”: prices decline over the course of the auction, with the main decline occurring towards the end of the day. We show that the data are consistent with a simple model of sequential auctions of goods with independent values, and examine distributions which replicate the important features of the data. The crucial feature driving the price declines in the model is a limited capacity for purchases by the participants in the auction, which in turn decreases competition for the final units in the auction.
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