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Evidence of affiliation of values in a repeated trial auction experiment

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  • John Bernard

Abstract

Most auction experiments designed to determine subjects' values use repeated trials. This is primarily to give subjects a chance to understand the auction and to learn from market feedback. However, concerns exist that repetition could lead to affiliation of values with subjects following final prices over trials. This could be especially true for items consumers are unfamiliar with. To test these hypotheses, the current research employed repeated auction trials for conventional, organic, and non-GM chocolate bars, with each respectively considered less familiar to subjects. The auction results were first analysed to determine whether the premiums, calculated as the differences in bids between bar types, were statistically significant over each trial. A tobit regression analysis was then conducted to determine which factors statistically influenced premiums over each trial. Analysis showed that the premium for the non-GM bar over the conventional and most of the factors explaining the premiums in the first trial became insignificant after repetition. This suggested strong evidence of affiliation and demonstrated how it can lead to loss of information about subjects' initial formulation of values. It is recommended that, depending on the focus of the study, single trials should be used to avoid these problems.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 11 ()
Pages: 687-691

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:11:p:687-691

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  1. 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.
  2. Harrison, Glen W. & Ronald M. Harstad & E. Elisabet Rutström, 1995. "Experimental Methods and Elicitation of Values," Discussion Paper Serie B 349, University of Bonn, Germany.
  3. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  4. John A. List & Jason F. Shogren, 1999. "Price Information and Bidding Behavior in Repeated Second-Price Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 942-949.
  5. Frode Alfnes & Kyrre Rickertsen, 2003. "European Consumers' Willingness to Pay for U.S. Beef in Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 396-405.
  6. 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.
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Cited by:
  1. Valle, Haydn & Capon, Timothy & Harris, Michael & Reeson, Andrew, 2012. "Coordination and Strategic Behaviour in Landscape Auctions," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124466, Australian Agricultural and Resource Economics Society.
  2. Rolfe, John & Windle, Jill, 2006. "Using Field Experiments to Explore the Use of Multiple Bidding Rounds in Conservation Auctions," Discussion Papers 25801, International Association of Agricultural Economists.
  3. Bernard, John C. & Bernard, Daria J., 2010. "Comparing Parts with the Whole: Willingness to Pay for Pesticide-Free, Non-GM, and Organic Potatoes and Sweet Corn," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(3), December.
  4. Shunda, Nicholas, 2009. "Auctions with a buy price: The case of reference-dependent preferences," Games and Economic Behavior, Elsevier, vol. 67(2), pages 645-664, November.
  5. He, Na & Bernard, John C., 2011. "Differences in WTP and Consumer Demand for Organic and Non-GM Fresh and Processed Foods," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), August.

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