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The initial endowment effect in experimental auctions revisited: further evidence

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  • Lanier Nalley
  • Darren Hudson
  • Gregory Parkhurst

Abstract

This analysis employs a uniform 4th price sealed-bid auction to test the impact of endowment heterogeneity on participant bids. A mechanism to legitimize the wealth of participants consistent with prior research on endowments is employed. Second, unlike some previous literature, a mechanism to endogenously induce endowment heterogeneity is employed. Results from a Tobit analysis of participant bids indicate that endowment heterogeneity has no significant impact on bidding behaviour. Therefore, it is concluded that when wealth is legitimized within an experiment, bidding behaviour is more likely rational leading to more robust experimental results.

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Bibliographic Info

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

Volume (Year): 12 (2005)
Issue (Month): 1 ()
Pages: 59-63

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:1:p:59-63

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Cited by:
  1. Todd L. Cherry & Stephan Kroll & Jason Shogren, 2004. "The Impact of Endowment Heterogeneity and Origin on Contributions in Best-Shot Public Good Games," Working Papers 04-10, Department of Economics, Appalachian State University.

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