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

摘要

Rights of first refusals (RFRs) granted to tenants in land privatization auc-tions enable them to purchase their leased land by accepting the highest bid. RFRs may deter bidders and incentivize non-right hold -ers to adjust their bidding. We conjecture that tenant favoritism with RFRs reduces compe-tition and thus sales prices at the expense of the public sellers. To test the conjectures, we compile a data set of land auctions by two privatization agencies in eastern Germany, one favoring tenants along with an RFR, be-tween 2007 and 2018. Double robust match -ing results indicate RFR-related reductions in the number of bidders and prices. (JEL Q15, D44)