A Comparison of Pricing Structures at Video and Traditional Cattle Auctions

The number of cattle sold through video auctions has increased dramatically during the past five years. In this study structural differences in pricing between a group of traditional auctions and the nation's largest satellite video cattle auction are examined. A Chow test for structural pricing differences reveals that the influence of lot characteristics, market information, and merchandising strategies on cattle prices are essentially identical at both types of auctions. However, optimal lot size is larger at video auctions than at traditional auctions. Key words: Chow test, structural differences, video auctions. Satellite video cattle auctions are rapidly be-coming a popular method for selling cattle (Scharlier). For example, Superior Livestock Auction (SLA), the nation's largest satellite video cattle auction, sold more than 450,000 head of cattle in 1989 and over 760,000 head in 1990. Differences between traditional and video auctions raise questions about methods and strategies that maximize profits in this new type of market. For example, buyers examine a video recording of cattle lots at a video auc-tion rather than viewing the cattle in person. Also, the number of buyers is larger at video auctions than at traditional auctions.1 In ad-dition, video auction cattle are priced for future delivery, delivery weights are not guaranteed, cattle lots are larger than at traditional auc-The authors are, respectively, an associate professor and forme