Thursday 15 March 2018, 1.00PM to 2.00pm
Speaker(s): Siqi Song (York)
The aim of this paper is to analyse the impact of wine score on latent bidders’ private valuations in Christie’s live Fine Wine auctions, in ascending price format. In order to achieve this aim, I adopt an indirect inference method to estimate the bidders’ valuation distribution by employing a cross-sessional data set.
My major findings are as follows. Firstly, wine score is a crucial structural element that determines the underlying private valuation distribution. In the secondary wine market, bidders seem to heavily rely on wine scores to make a purchase decision. To be specific, as score increases by one point, the expected private valuation of bidder increases by around 8.02%. Secondly, two non-sensory characteristics - chateau and vintage year - have no significant effect on bidder’s valuation. Thirdly, after characterising the underlying bidder’s valuation distribution, I calculate the optimal reserve price at different levels of seller valuation. I find that the reserve price set by Christie’s is not optimal. My simulation outcomes indicate that a higher reserve price may lead to higher total revenue for sellers.
Location: A/EC202 Economics Staff Room
Admission: Staff and PhD Students