Discussion Papers 2020

CIRJE-F-1141	"Morning-Fresh: Declining Prices and the Right-to-Choose in a Faroese Fish Market"
Author Name	Laksá, Sanna and Daniel Marszalec
Date	January 2020
Full Paper	PDF File
Remarks

Abstract
Classical auction models predict that when homogeneous goods are sold sequen- tially, the sale prices should exhibit no trend over time. This hypothesis was rst empirically tested by Ashenfelter (1989), who noticed that prices in wine auctions tended to decline throughout the day - hence the term "the afternoon effect." We use transaction-level data from wholesale sh auctions in the Faroe Islands to test for declining prices using two different estimation methods. Both methods show that the price trends in Faroese sh market auctions are declining - furthermore, the pattern persists both on aggregate, and within individual sh species. We attribute this price decline to two main factors: the declining number of bidders, and the possibly declining quality of sh, throughout the day. Though the dataset logs each unit of the same species as identical, early auction winners have the "right to choose" their preferred box before the rest is re-auctioned. This is likely to contribute to a decline in perceived sh quality in later auctions that is unobservable in the data, but important in motivating bidder behaviour.

Abstract

Classical auction models predict that when homogeneous goods are sold sequen- tially, the sale prices should exhibit no trend over time. This hypothesis was rst empirically tested by Ashenfelter (1989), who noticed that prices in wine auctions tended to decline throughout the day - hence the term "the afternoon effect." We use transaction-level data from wholesale sh auctions in the Faroe Islands to test for declining prices using two different estimation methods. Both methods show that the price trends in Faroese sh market auctions are declining - furthermore, the pattern persists both on aggregate, and within individual sh species. We attribute this price decline to two main factors: the declining number of bidders, and the possibly declining quality of sh, throughout the day. Though the dataset logs each unit of the same species as identical, early auction winners have the "right to choose" their preferred box before the rest is re-auctioned. This is likely to contribute to a decline in perceived sh quality in later auctions that is unobservable in the data, but important in motivating bidder behaviour.