Oxford Economic Papers Advance Access originally published online on March 26, 2009
Oxford Economic Papers 2009 61(4):761-775; doi:10.1093/oep/gpp003
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© Oxford University Press 2009 All rights reserved
This article appears in the following Oxford Economic Papers issue: Symposium on Resource Rich Economies [View the issue table of contents]
Who pays brokers’ commissions? Evidence from fine wine auctions
Department of Economics, University of Wisconsin-Whitewater, c/o 4444 North Prospect Avenue, Milwaukee, WI 53211–1773, USA; e-mail: marksd{at}uww.edu
JEL classifications: D44, H22
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Abstract |
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As brokers between consignors and buyers, auction houses routinely charge successful bidders a broker's commission—a percent of their successful bids. This study considers the extent to which differences in brokers’ commissions are reflected in differences in winning bids in fine wine auctions, drawing upon an unusually detailed collection of auction data for Bordeaux wine and providing a ‘natural experiment’ for testing the incidence of brokers’ commissions. The data allow not only a test of the extent to which the commission charged to buyers is reflected in the buyers’ bids but also a reasonably comprehensive explanation of variations in wine auction prices. The results indicate that buyers’ premia are capitalized fully into bids so that bids fall accordingly with obvious consequences for the proceeds from the sale.