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Anchoring effects in an experimental auction – Are farmers anchored?

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  • Holst, Gesa Sophie
  • Hermann, Daniel
  • Musshoff, Oliver

Abstract

Auctioning goods is a widespread practice, particularly in the agricultural sector. The outcome of auctions can be affected by various factors. One of these factors can be anchoring effects, which describe the influence of present available information on numerical values in human decisions. However, the influence of anchoring effects in auctions carried out offline – that is, live events that are not taking place on the internet – is largely unknown. For this reason, we analyze anchoring effects of exogenously provided values using an experimental common value auction with entrepreneurs. In total, 48 groups each made of five farmers participate in a series of four auctions for envelopes containing a €10 banknote with a 50% probability of occurrence. Our results indicate that anchoring based on exogenously presented values can either result in negative adjustment in open bid auctions, or no adjustment in closed-seal bid auctions. Furthermore, the results show that previous bids affect following bids, which may also be an anchoring effect.

Suggested Citation

  • Holst, Gesa Sophie & Hermann, Daniel & Musshoff, Oliver, 2015. "Anchoring effects in an experimental auction – Are farmers anchored?," Journal of Economic Psychology, Elsevier, vol. 48(C), pages 106-117.
    • Handle: RePEc:eee:joepsy:v:48:y:2015:i:c:p:106-117
    DOI: 10.1016/j.joep.2015.03.008
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    4. Ballesteros, Josefina F. & Schouteten, Joachim J. & Otilla, Angelyn & Ramirez, Ramona Isabel & Gellynck, Xavier & Casaul, Julieta & De Steur, Hans, 2023. "Does award and origin labeling influence consumers’ willingness-to-pay beyond sensory cues? An experimental auction on improved Philippine tablea (cocoa liquor)," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 102(C).
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    6. Tanya O’Garra & Matthew R Sisco, 2020. "The effect of anchors and social information on behaviour," PLOS ONE, Public Library of Science, vol. 15(4), pages 1-19, April.
    7. Ivanova-Stenzel, Radosveta & Seres, Gyula, 2022. "Anchored strategic reasoning," Economics Letters, Elsevier, vol. 212(C).
    8. Stefan Seifert & Silke Hüttel, 2023. "Is there a risk of a winner’s curse in farmland auctions?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 50(3), pages 1140-1177.

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    More about this item

    Keywords

    Anchoring effect; Experimental auction; Extra-laboratory experiment; Agricultural decision maker; Previous sale price;
    All these keywords.

    JEL classification:

    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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