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A Note on First-Price Sealed-Bid Cattle Auctions in the Presence of Captive Supplies

Published online by Cambridge University Press:  15 September 2016

John M. Crespi  and
Tian Xia
John M. Crespi*
Affiliation:
Department of Economics of Iowa State University, Ames
Tian Xia
Affiliation:
Department of Agricultural Economics at Kansas State University, Manhattan
*
Correspondence: John Crespi▪Dept of Economics▪369 Heady Hall▪Iowa State University▪Ames, IA 50011-1070▪Phone 515.294.1699▪Email[email protected].
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Abstract

The authors present an analytical model of a first-price sealed-bid cattle auction in which a spot and coordinated markets are interconnected. The model reveals that the conventional wisdom that market coordination negatively affects the bid price in the spot market is an oversimplification. The relationships between key market variables impact bids and bid shading in complex ways. While captive supplies can lead to lower spot prices, the price reductions do not necessarily stem from an increase in market power due to contracting. The model emphasizes the importance of several variables for future empirical studies.

Keywords

auctioncaptive suppliescattle marketscontracting
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 44 , Issue 3 , December 2015 , pp. 340 - 345
Copyright
Copyright © 2015 Northeastern Agricultural and Resource Economics Association 

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References

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