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Inducing Risk-Neutral Preferences: Further Analysis of the Data

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Author Info

  • Cox, James C
  • Oaxaca, Ronald L

Abstract

The lottery payoff procedure does not successfully induce risk-neutral bidding behavior in first-price, sealed-bid auctions. This conclusion follows from both ordinary-least-squares estimation with natural data and least-absolute-deviation estimation with transformed data from numerous experimental designs. Lottery payoffs do not succeed in inducing behavior predicted from standard expected utility theory assumptions or from assumed utility from winning and/or income thresholds. In contrast, first-price auction experiments with monetary payoffs yield results that are consistent with general models of bidding in the independent private values information environment. Copyright 1995 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 11 (1995)
Issue (Month): 1 (July)
Pages: 65-79

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Handle: RePEc:kap:jrisku:v:11:y:1995:i:1:p:65-79

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Web page: http://www.springerlink.com/link.asp?id=100299

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Cited by:
  1. repec:aea:jeclit:v:43:y:2005:i:1:p:65-107 is not listed on IDEAS
  2. Reinhard Selten & Abdolkarim Sadrieh & Klaus Abbink, 1999. "Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Theory and Decision, Springer, vol. 46(3), pages 213-252, June.
  3. Haruvy, Ernan & Stahl, Dale O., 2007. "Equilibrium selection and bounded rationality in symmetric normal-form games," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 98-119, January.
  4. Andreas Lange & John A. List & Michael K. Price, 2010. "Auctions with Resale When Private Values Are Uncertain: Evidence from the Lab and Field," NBER Working Papers 16360, National Bureau of Economic Research, Inc.
  5. Ernan Haruvy & Dale Stahl, 2004. "Level-n Bounded Rationality on a Level Playing Field of Sequential Games," Econometric Society 2004 North American Winter Meetings 126, Econometric Society.

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