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Auction Markets for Evaluations

Author

Listed:
  • Cary A. Deck

    (Department of Economics, The University of Arkansas)

  • Bart J. Wilson

    () (Interdisciplinary Center for Economic Science, George Mason University)

Abstract

When the value of a product or service is uncertain, outcomes can be inefficient. A market for evaluations can theoretically increase efficiency by voluntarily eliciting an evaluation that would otherwise not be provided. This paper uses a controlled laboratory experiment to test the performance of four market mechanisms to provide product evaluations. The mechanisms considered are derived from the oft studied uniform price sealed bid, discriminatory price sealed bid, English clock auction, and Dutch clock auction. Our results indicate for this nonrivalrous product that (i) each of these institutions improves social welfare and (ii) the performances of the four mechanisms are equivalent. This second point is particularly noteworthy given that differing behavior is routinely observed in traditional private value auctions.

Suggested Citation

  • Cary A. Deck & Bart J. Wilson, 2005. "Auction Markets for Evaluations," Southern Economic Journal, Southern Economic Association, vol. 72(1), pages 42-62, July.
  • Handle: RePEc:sej:ancoec:v:72:1:y:2005:p:42-62
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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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