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The Effect of Initial Endowments in Experimental Auctions

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  • Jay R. Corrigan
  • Matthew C. Rousu

Abstract

We report the results of an experiment designed to test whether initial endowments affect value estimates elicited from experimental auctions. Comparing bids for one unit of a good, two units of a good, and a second unit of a good when endowed with the first unit, we find that willingness to pay for the second unit of a good is, on average, as much as 75% higher when endowed with the first unit. We go on to advance two theories that could potentially reconcile our results with neoclassical consumer theory. Copyright 2006, Oxford University Press.

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  • Jay R. Corrigan & Matthew C. Rousu, 2006. "The Effect of Initial Endowments in Experimental Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 448-457.
  • Handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:448-457
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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