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Posted Prices and Bid Affiliation: Evidence from Experimental Auctions

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Author Info
Jay R. Corrigan
Matthew C. Rousu

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Abstract

In most experimental auctions, researchers ask participants to bid on the same item in multiple potentially binding rounds, posting the price submitted by the top bidder or bidders after each of those rounds. If bids submitted in later rounds are affiliated with posted prices from earlier rounds, this practice could result in biased value estimates. In this article, we discuss the results of an experiment designed explicitly to test whether posted prices affect bidding behavior. We find that for familiar items, high posted prices lead to increased bids in subsequent rounds. Our results have implications for researchers conducting experimental auctions. Copyright 2006 American Agricultural Economics Association.

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Article provided by American Agricultural Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 88 (2006)
Issue (Month): 4 (November)
Pages: 1078-1090
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Handle: RePEc:bla:ajagec:v:88:y:2006:i:4:p:1078-1090

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. repec:cup:cbooks:9780521671248 is not listed on IDEAS
  2. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
  3. David Dickinson & DeeVon Bailey, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Working Papers 2002-07, Utah State University, Department of Economics. [Downloadable!]
    Other versions:
  4. Lusk, Jayson L., 2003. "Using Experimental Auctions for Marketing Applications: A Discussion," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(02), August. [Downloadable!]
  5. Buhr, Brian L. & Hayes, Dermot J. & Shogren, Jason F. & Kliebenstein, James B., 1993. "Valuing Ambiguity: The Case Of Genetically Engineered Growth Enhancers," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(02), December. [Downloadable!]
  6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December. [Downloadable!] (restricted)
  7. Fox, John & Hayes, Dermot & Shogren, Jay, 2002. "Consumer Preferences for Food Irradiation: How Favorable and Unfavorable Descriptions Affect Preferences for Irradiated Pork in Experimental Auctions," Staff General Research Papers 5207, Iowa State University, Department of Economics.
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  8. Jay R. Corrigan & Matthew C. Rousu, 2006. "Posted Prices and Bid Affiliation: Evidence from Experimental Auctions," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 88(4), pages 1078-1090, November. [Downloadable!] (restricted)
    Other versions:
  9. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2002. "Do consumers not care about biotech foods or do they just not read the labels?," Economics Letters, Elsevier, vol. 75(1), pages 47-53, March. [Downloadable!] (restricted)
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  10. repec:cup:cbooks:9780521855167 is not listed on IDEAS
  11. W. Bruce Traill, 2004. "Effect of information about benefits of biotechnology on consumer acceptance of genetically modified food: evidence from experimental auctions in the United States, England, and France," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 179-204, June.
  12. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November. [Downloadable!] (restricted)
  13. Shogren, Jason F & Hayes, Dermot J, 1997. "Resolving Differences in Willingness to Pay and Willingness to Accept: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 241-44, March. [Downloadable!] (restricted)
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  14. Jay R. Corrigan & Matthew C. Rousu, 2006. "The Effect of Initial Endowments in Experimental Auctions," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 88(2), pages 448-457, 05. [Downloadable!] (restricted)
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  15. Fox, John A. & Buhr, Brian L. & Shogren, Jason F. & Kliebenstein, James B. & Hayes, Dermot J., 1995. "Comparison of Preferences for Pork Sandwiches Produced from Animals With and Without Somatotropin Administration (A)," Staff General Research Papers 852, Iowa State University, Department of Economics.
  16. Frode Alfnes & Kyrre Rickertsen, 2005. "European Consumers' Willingness to Pay for U.S. Beef in Experimental Auction Markets: Reply," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(1), pages 258-260, 02. [Downloadable!] (restricted)
  17. Jack Knetsch & Fang-Fang Tang & Richard Thaler, 2001. "The Endowment Effect and Repeated Market Trials: Is the Vickrey Auction Demand Revealing?," Experimental Economics, Springer, vol. 4(3), pages 257-269, December. [Downloadable!] (restricted)
  18. Wallace E. Huffman & Matthew Rousu & Jason F. Shogren & Abebayehu Tegene, 2003. "The Public Good Value of Information from Agribusinesses on Genetically Modified Foods," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(5), pages 1309-1315, December. [Downloadable!] (restricted)
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  19. Hayes, Dermot J. & Shogren, Jason F. & Shin, Seung Youll & Kliebenstein, James B., 1995. "Valuing Food Safety in Experimental Auction Markets," Staff General Research Papers 835, Iowa State University, Department of Economics.
  20. Kolstad, Charles D. & Guzman, Rolando M., 1999. "Information and the Divergence between Willingness to Accept and Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 38(1), pages 66-80, July. [Downloadable!] (restricted)
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  21. Abbink, Klaus & Brandts, Jordi & McDaniel, Tanga, 2003. "Asymmetric Demand Information in Uniform and Discriminatory Call Auctions: An Experimental Analysis Motivated by Electricity Markets," Journal of Regulatory Economics, Springer, vol. 23(2), pages 125-44, March. [Downloadable!] (restricted)
  22. Shogren, Jason F & List, John A & Hayes, Dermot J, 2000. " Preference Learning in Consecutive Experimental Auctions," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(4), pages 1016-21, November. [Downloadable!] (restricted)
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  23. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December. [Downloadable!] (restricted)
  24. Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April. [Downloadable!] (restricted)
  25. Lusk, Jayson L. & Daniel, M. Scott & Mark, Darrell R. & Lusk, Christine L., 2001. "Alternative Calibration And Auction Institutions For Predicting Consumer Willingess To Pay For Nongenetically Modified Corn Chips," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July. [Downloadable!]
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  26. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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  27. Ronald G. Cummings & Laura O. Taylor, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthew C. Rousu & Robert H. Beach & Jay R. Corrigan, 2008. "The Effects of Selling Complements and Substitutes on Consumer Willingness to Pay: Evidence from Laboratory Experiments," Working Papers 0801, Kenyon College, Department of Economics. [Downloadable!]
  2. Rousu, Matthew & Huffman, Wallace & Shogren, Jason F. & Tegene, Abebayehu, 2006. "Effects and Value of Verifiable Information in a Controversial Market: Evidence from Lab Auctions of Genetically Modified Food," Staff General Research Papers 12702, Iowa State University, Department of Economics.
    Other versions:
  3. Jay R. Corrigan & Matthew C. Rousu, 2006. "Posted Prices and Bid Affiliation: Evidence from Experimental Auctions," Working Papers 0602, Kenyon College, Department of Economics. [Downloadable!]
    Other versions:
  4. Matthew C. Rousu & Jay R. Corrigan, 2008. "Estimating the Value Consumers Derive from Product Labeling," Working Papers 0802, Kenyon College, Department of Economics. [Downloadable!]
  5. Colson, Gregory & Huffman, Wallace E. & Rousu, Matthew, 2009. "Demand Curve Effects in Experimental Auctions: The Effect of Quantity Already Owned," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49551, Agricultural and Applied Economics Association. [Downloadable!]
  6. Chern, Wen S. & Chang, Chun-Yu, 2009. "Benefit Evaluation of the Country of Origin Labeling in Taiwan: Results from Auction Experiment," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49215, Agricultural and Applied Economics Association. [Downloadable!]
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