The Price of Disclosure in the Thoroughbred Yearling Market

In this paper, we examine the effects of disclosure of information on market price using Thoroughbred yearling auction data. We find that disclosures do not influence price in a segment of the auction in which quality certification is available, and consequently, the data suggest that sellers “over-disclose” in this segment of the market. However, among non-certified yearlings, we find evidence that some types of disclosures provide valuable information to buyers. Moreover, when estimating the average market value of disclosures, results suggest that some types of information are highly costly to sellers in terms of discounted prices.