The Declining Price Effect in Sequential Auctions: What Theory Does Not Predict

This paper studies different explanations given for the "price decline anomaly" in sequential auctions, a phenomenon also known as the "afternoon effect". It surveys the dedicated theoretical models and then explores the influence of the institutional or market characteristics (of the sale) on the price trend. Next , it presents different methods used for measuring price trends and analytically identifies the differences between them. Finally, data from wine auctions are used to show that different methods may lead to opposite trends from the same data and that the number of identical objects being sold influences the price trend.