Price Expectations and Supply Response in the Thoroughbred Yearling Market

Abstract

Limited information is available concerning price determination in the thoroughbred yearling market. A recursive model incorporating price expectations and biological constraints is used to estimate supply and demand functions for thoroughbred horses. Empirical results characterize a market with inelastic supply and elastic demand that converges to equilibrium under static conditions. Purses were identified as the most influential variable impacting price. Comparative statics illustrate the effectiveness of purses as a policy instrument for the thoroughbred industry. Federal tax policy also was found to have a significant impact on the decisions to breed or invest in thoroughbred yearlings.

The Price of Disclosure in the Thoroughbred Yearling Market

“…is interpreted as the percent change in price when characteristic j is present; we evaluate 10 As a result of data limitations, we consider sales in only 1 year and must exclude macroeconomic factors considered by Karungu, Reed, and Tvedt (1993) such as interest and exchange rates and by Neibergs and Thalheimer (1997) such as average purses in a given year and the value of tax benefits.…”

A hedonic price analysis of thoroughbred broodmare characteristics

“…Lansford, Freeman, Topliff, and Walker (1998) analyzed Quarter horse yearlings. Neibergs and Thalheimer (1997) developed a structural model of the Thoroughbred yearling market.…”

Association between the purchase price of Thoroughbred yearlings and their performance during the 2- and 3-year-old racing seasons

“…For example, during the 2002-03 season, 4057 yearlings were sold at auction in Australia for a total of approximately A$167 million. 5,8,9,12 Yearling-specific variables such as age or month foaled, radiographi-cally identified first phalanx fragments, history of arthroscopy, sire's stud fee, racing performance of the dam and racing performance of siblings have been consistently shown to affect the value of a yearling at sale. [4][5][6][7][8][9][10][11][12] Macroeconomic factors such as available prize money, international buyers, incentive schemes and tax benefits have been shown to have an effect on the purchase price of yearlings.…”

“…3 A number of studies have investigated the factors that influence yearling purchase price. [4][5][6][7][8][9][10][11][12] Macroeconomic factors such as available prize money, international buyers, incentive schemes and tax benefits have been shown to have an effect on the purchase price of yearlings. 5,8,9,12 Yearling-specific variables such as age or month foaled, radiographi-cally identified first phalanx fragments, history of arthroscopy, sire's stud fee, racing performance of the dam and racing performance of siblings have been consistently shown to affect the value of a yearling at sale.…”

“…[4][5][6][7][8][9][10][11][12] Macroeconomic factors such as available prize money, international buyers, incentive schemes and tax benefits have been shown to have an effect on the purchase price of yearlings. 5,8,9,12 Yearling-specific variables such as age or month foaled, radiographi-cally identified first phalanx fragments, history of arthroscopy, sire's stud fee, racing performance of the dam and racing performance of siblings have been consistently shown to affect the value of a yearling at sale. 4,5,7,11,12 An economically rational investor would be prepared to pay no more for a yearling than the net present value of the expected life-time earnings of the horse plus the net present value of the residual value of the horse once its racing career has finished.…”