Open Access

Tenant Favoritism and Right of First Refusals in Farmland Auctions: Competition and Price Effects

Lars Isenhardt, Stefan Seifert and Silke Hüttel

Abstract

Rights of First Refusals (RFRs) granted to tenants in land privatization auctions enable them to purchase their leased land by accepting the highest bid. RFRs may however deter bidders and incentivize non-right holders to adjust their bidding. We conjecture that tenant favoritism with RFRs reduces competition and thus sales prices at the expense of the public sellers. To test the conjectures, we compile a dataset of land auctions by two privatization agencies in eastern Germany, one favoring tenants along with an RFR, between 2007 and 2018. Double-robust matching results indicate RFR-related reductions in the number of bidders and prices.

JEL

This open access article is distributed under the terms of the CC-BY-NC-ND license http://creativecommons.org/licenses/by-nc-nd/4.0) and is freely available online at: http://le.uwpress.org.