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Common values and unobserved heterogeneity in farmland auctions in Germany

Author

Listed:
  • Seifert, Stefan
  • Hüttel, Silke
Abstract
In this paper, we test for the existence of a common component in agricultural land auctions in eastern Germany during the price boom 2007-2018 and discuss respective policy implications. Using a large, detailed dataset of auctions, we can rely on professional appraisals of the auctioned good that are privy to the seller to control for unobserved heterogeneity. We derive a new approach to disentangle valuations from observed and unobserved heterogeneity across auctions. For validation purposes we provide several model specifications; based on all models, we strongly reject purely private valuations. Based on the rich identification strategy, we conclude the existence of a common component in these auctions to be very likely. Our results first underline the importance of an adequate model specification to analyze farmland auctions. Second, from a policy perspective, the implied potential for a winner's curse can be seen as a warning sign for the sector.

Suggested Citation

  • Seifert, Stefan & Hüttel, Silke, 2020. "Common values and unobserved heterogeneity in farmland auctions in Germany," FORLand Working Papers 21 (2020), Humboldt University Berlin, DFG Research Unit 2569 FORLand "Agricultural Land Markets – Efficiency and Regulation".
    • Handle: RePEc:zbw:forlwp:212020
    DOI: 10.18452/21172
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    References listed on IDEAS

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    4. von Hobe, Cord-Friedrich & Musshoff, Oliver, 2021. "On the effectiveness of restricted tendering as a form of policy intervention on agricultural land markets," Land Use Policy, Elsevier, vol. 103(C).
    5. Olena Myrna, 2022. "Lower price increases, the bounded rationality of bidders, and underbidding concerns in online agricultural land auctions: The Ukrainian case," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 826-844, September.

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    More about this item

    Keywords

    Farmland auctions; common values; unobserved heterogeneity;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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