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Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration

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  • Corrigan, Jay
  • Drichoutis, Andreas
  • Lusk, Jayson
  • Nayga, Rodolfo
  • Rousu, Matt

Abstract

It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes, this improvement is not the result of price feedback.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28337.

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Date of creation: Jan 2011
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Handle: RePEc:pra:mprapa:28337

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Keywords: bid affiliation; posted prices; induced value experiment; preference reversals; lotteries;

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Cited by:
  1. Teresa, Briz & Drichoutis, Andreas & Nayga, Rodolfo & House, Lisa, 2011. "Examining Projection Bias in Experimental Auctions: The Role of Hunger and Immediate Gratification," MPRA Paper 44764, University Library of Munich, Germany, revised 05 Mar 0013.
  2. Andreas C. Drichoutis & Rodolfo M. Nayga & Jayson L. Lusk & Panagiotis Lazaridis, 2012. "When a risky prospect is valued more than its best possible outcome," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(1), pages 1-18, January.
  3. Loureiro, Maria L. & Gracia, Azucena & Nayga, Rodolfo M., 2013. "Do experimental auction estimates pass the scope test?," Journal of Economic Psychology, Elsevier, vol. 37(C), pages 7-17.

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