Consumption Periods in Advance Selling Auctions: Evidence from US Timber Market

Abstract

This study investigates products sold before consumption and examines how the duration of the consumption periods and the choice of selling mechanism influence sellers' revenue. Using empirical data from timber auctions, we identify buyers' tendency to delay consumption to resolve payoff uncertainty and reveal heterogeneous motivations among buyers. Through structural estimation, we uncover key parameters for each buyer type, including sensitivity to realized payoffs and consumption-related costs. Leveraging these estimates, we perform counterfactual analyses to propose revenue-enhancing consumption periods and selling mechanisms. Our findings suggest that extending the consumption periods is likely to increase revenue, with the magnitude depending on the selling mechanism, the composition of buyer types, and the number of interested buyers.

Tasks

Reproductions