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Selection Bias, Demographic Effects, and Ability Effects in Common Value Auction Experiments

  • Marco Casari
  • John C. Ham
  • John H. Kagel

Inexperienced women, along with economics and business majors, are much more susceptible to the winner's curse, as are subjects with lower SAT/ACT scores. There are strong selection effects in bid function estimates for inexperienced and experienced subjects due to bankruptcies and bidders who have lower earnings returning less frequently as experienced subjects. These selection effects are not identified using standard econometric techniques but are identified through experimental treatment effects. Ignoring these selection effects leads to misleading estimates of learning. (JEL D44, D83, J16)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1278-1304

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1278-1304
Note: DOI: 10.1257/aer.97.4.1278
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  1. Catherine C. Eckel & Philip J. Grossman, 2008. "Sex and Risk: Experimental Evidence," Monash Economics Working Papers archive-09, Monash University, Department of Economics.
  2. John H. Kagel & Colin M. Campbell & Dan Levin, 1999. "The Winner's Curse and Public Information in Common Value Auctions: Reply," American Economic Review, American Economic Association, vol. 89(1), pages 325-334, March.
  3. Garvin, Susan & Kagel, John H., 1994. "Learning in common value auctions: Some initial observations," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 351-372, December.
  4. Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
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  8. Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Monash Economics Working Papers archive-03, Monash University, Department of Economics.
  9. Govert Bijwaard & Geert Ridder, 1998. "Correcting for Selective Compliance in a Re-Employment Bonus Experiment," Economics Working Paper Archive 412, The Johns Hopkins University,Department of Economics.
  10. Lee, Lung-Fei, 1982. "Some Approaches to the Correction of Selectivity Bias," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 355-72, July.
  11. Marco Casari & John C. Ham & John H. Kagel, 2007. "Selection Bias, Demographic Effects, and Ability Effects in Common Value Auction Experiments," American Economic Review, American Economic Association, vol. 97(4), pages 1278-1304, September.
  12. John H. Kagel & Jean-Francois Richard, 2001. "Super-Experienced Bidders In First-Price Common-Value Auctions: Rules Of Thumb, Nash Equilibrium Bidding, And The Winner'S Curse," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 408-419, August.
  13. Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March.
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  15. Chen, Yan & Katuščák, Peter & Ozdenoren, Emre, 2013. "Why canʼt a woman bid more like a man?," Games and Economic Behavior, Elsevier, vol. 77(1), pages 181-213.
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  17. Nijman, T.E. & Verbeek, M.J.C.M., 1992. "Testing for selectivity in panel data models," Other publications TiSEM 7ec34a6c-1d84-4052-971c-d, School of Economics and Management.
  18. Kagel, John & Pevnitskaya, Svetlana & Ye, Lixin, 2008. "Indicative bidding: An experimental analysis," Games and Economic Behavior, Elsevier, vol. 62(2), pages 697-721, March.
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