Behavioral Efficiency II: A Simple Laboratory Demonstration
AbstractLaboratory experiments reporting on shortfalls from allocative efficiency of allocation mechanisms depend on the induced-values methodology, which cannot be extended to the field. Harstad  proposes to observe efficiency of allocation mechanisms without knowing motivations via behavior in appropriately designed aftermarkets. This paper demonstrates the approach in a highly simplified economy: allocation of a single unit of an abstract commodity. In the context studied, second-price auctions are observed to yield significantly greater behavioral inefficiencies than first-price auctions, both in terms of frequency of behaviorally inefficient outcomes, and in terms of the expected size of gains from aftermarket trade missed by the auction itself. The design is shown to be field-ready.
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Bibliographic InfoPaper provided by Department of Economics, University of Missouri in its series Working Papers with number 1121.
Length: 10 pgs.
Date of creation: 09 Oct 2011
Date of revision:
behavioral efficiency; field experiment methodology; allocative efficiency; efficiency of auctions; aftermarkets;
Other versions of this item:
- Ronald M Harstad, 2011. "Behavioral Efficiency II: A Simple Laboratory Demonstration," ISER Discussion Paper 0819, Institute of Social and Economic Research, Osaka University.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
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- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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