Wine auctions: More explanations for the declining price anomaly

Abstract

Extant research has observed a declining price anomaly in a study of wine auctions, also called the afternoon effect: in sequential English auctions of wine, the price reduces. Previously suggested explanations include absentee bidder effect, option effect with non-decreasing absolute risk aversion, decreasing quality effect, the varying size and quantity effect and the synergy or complementary effect. To this list, we add some economic and behavioural explanations: the diminishing consumer's surplus explanation, the transactions cost of re-trading, the subsequent information explanation, new collusion formation and the loss aversion explanation. The list of effects or explanations is sufficiently long to question whether declining prices are an anomaly.