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

Lars Isenhardt; Stefan Seifert; Silke Hüttel

doi:10.3368/le.080721-0091R1

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Figure 1
Effects Attributable to Tenant Favoritism Based on Auction-Theoretical Considerations and Conjectures to Be Investigated Empirically
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Figure 2
Average Soil Quality and Average Number of Bids by County
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Figure 3
Winning Bids and Number of Observations (top) of BVVG and LGSA Land Auctions 2007–2018
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Figure 4
Matching Quality Measures
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Figure 5
Rights of First Refusal–Related Price Effects over the Number of Participants Based on the Coefficients of Model Equation [5a] and [5b]

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Table 1

Descriptive Statistics of LGSA and BVVG Land Auctions, 2007-2018

	Seller: LGSA (926 Transactions)					Seller: BVVG (2,973 Transactions)
	Mean	Med.	SD	Q01	Q99	Mean	Med.	SD	Q01	Q99
Lot Characteristics
Lot size (ha)	7.38	8.34	3.21	0.19	13.33	4.92	3.42	4.84	0.07	20.83
Soil quality (index)	67.23	71.00	21.46	22.93	99.00	50.23	46.00	20.50	18.17	97.00
Share of arable land (%)	86.89	98.2	24.59	0.00	100.00	68.99	91.60	39.30	0.00	100.00
Share of grassland (%)	10.02	0.00	23.17	0.00	100.00	24.99	0.00	37.46	0.00	100.00
Share of other land (%)	3.09	0.00	6.73	0.00	34.45	6.03	0.50	10.69	0.00	47.33
Auction Characteristics
Number of bids (count)	4.52	4.00	2.36	1.00	12.75	4.22	4.00	2.41	2.00	13.00
Winning bid (€/m²)	1.88	1.73	1.19	0.27	4.70	1.45	1.17	0.98	0.26	4.41
Right Holder
Submitted bid (0/1)	0.73	1.00	0.44	0.00	1.00
Exercised RFR (0/1)	0.59	1.00	0.49	0.00	1.00
Won by own bid (0/1)	0.11	0.00	0.32	0.00	1.00
Rejected RFR (0/1)	0.30	0.00	0.46	0.00	1.00

Note: Due to data privacy regulations, the table does not include information about the minima or maxima. RFR, right of first refusal.

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Table 2

Postmatching Regression Results

	[3a] ln(n-1)	[3b] ln(n^nRH-1)	[5a] log(p)	[5b] log(p)	[5c] log(p)
Intercept	0.232^** (0.112)	−0.003 (0.136)
Hedonic Characteristics
Soil quality	0.009^*** (0.001)	0.011^*** (0.001)	0.013^*** (0.001)	0.013^*** (0.001)	0.013^*** (0.001)
Lot size²	0.002^*** (0.000)	0.002^*** (0.000)	0.001^*** (0.000)	0.001^*** (0.000)	0.001^*** (0.000)
Share grassland	−0.003^*** (0.001)	−0.004^*** (0.001)	−0.007^*** (0.001)	−0.007^*** (0.001)	−0.007^*** (0.001)
Share other land	−0.017^*** (0.003)	−0.019^*** (0.003)	−0.010^*** (0.002)	−0.010^*** (0.002)	−0.010^*** (0.002)
Participant Class
No. participants: 2			−1.215^*** (0.050)	−1.207^*** (0.055)	−1.170^*** (0.049)
No. participants: 3			−1.139^*** (0.050)	−1.086^*** (0.054)	−1.112^*** (0.048)
No. participants: 4			−1.125^*** (0.052)	−1.074^*** (0.057)	−1.113^*** (0.049)
No. participants: 5			−1.047^*** (0.053)	−1.030^*** (0.057)	−1.041^*** (0.050)
No. participants: 6–8			−0.998^*** (0.053)	−1.032^*** (0.053)	−0.998^*** (0.050)
No. participants: 9+			−0.970^*** (0.056)	−1.021^*** (0.057)	−0.968^*** (0.054)
Tenant Support Effects with RFR
LGSA	−0.093^** (0.041)	−0.338^*** (0.043)	−0.164^*** (0.017)
LGSA: no. participants: 2				−0.159^*** (0.045)
LGSA: no. participants: 3				−0.233^*** (0.030)
LGSA: no. participants: 4				−0.224^*** (0.036)
LGSA: no. participants: 5				−0.173^*** (0.036)
LGSA: no. participants: 6–8				−0.092^*** (0.029)
LGSA: no. participants: 9+				−0.039 (0.032)
LGSA: tenant exercised RFR					−0.168^*** (0.018)
LGSA: tenant won by own bid					−0.382^*** (0.030)
LGSA: tenant rejected RFR					−0.056^*** (0.019)
Weights	Yes	Yes	Yes	Yes	Yes
Treated observations	926	929	926	926	926
Control observations	590	590	590	590	590
Pseudo R-squared/R-squared	0.292	0.326	0.874	0.876	0.876
θ	14.104 (2.214)	8.143 (1.003)

Note: Heteroskedasticity-consistent standard errors are in parentheses (White 1980). Parameter estimates for county and year dummy variables are reported in Appendix B. For [3a] and [3b], the pseudo R-squared is specified as the squared correlation coefficient between observed and fitted values. RFR, right of first refusal.
↵*p = < 0.1; **p = < 0.05; ***p = < 0.01.