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Abstract

This paper investigates the role of information and search cost in the price formation in thin farmland markets. Using a comprehensive data set with more than 10,000 transactions between 2014–2017 in one of the eastern German Federal States, we estimate a two-tier model to capture deviations from the efficient price due to search costs asymmetrically distributed between buyers and sellers. Relating these costs to the degree of professionalism, we find institutional sellers relying on public tenders to achieve the lowest losses from being information deficient. No differences can be related to farmer compared to non-farmer buyers.

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