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Evidence of affiliation of values in a repeated trial auction experiment

  • John Bernard

Most auction experiments designed to determine subjects' values use repeated trials. This is primarily to give subjects a chance to understand the auction and to learn from market feedback. However, concerns exist that repetition could lead to affiliation of values with subjects following final prices over trials. This could be especially true for items consumers are unfamiliar with. To test these hypotheses, the current research employed repeated auction trials for conventional, organic, and non-GM chocolate bars, with each respectively considered less familiar to subjects. The auction results were first analysed to determine whether the premiums, calculated as the differences in bids between bar types, were statistically significant over each trial. A tobit regression analysis was then conducted to determine which factors statistically influenced premiums over each trial. Analysis showed that the premium for the non-GM bar over the conventional and most of the factors explaining the premiums in the first trial became insignificant after repetition. This suggested strong evidence of affiliation and demonstrated how it can lead to loss of information about subjects' initial formulation of values. It is recommended that, depending on the focus of the study, single trials should be used to avoid these problems.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 11 ()
Pages: 687-691

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:11:p:687-691
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  1. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. John A. List & Jason F. Shogren, 1999. "Price Information and Bidding Behavior in Repeated Second-Price Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 942-949.
  3. Frode Alfnes & Kyrre Rickertsen, 2003. "European Consumers' Willingness to Pay for U.S. Beef in Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 396-405.
  4. Glenn W. Harrison & Ronald M. Harstad & E. Elisabet Rutstr–m, 2004. "Experimental Methods and Elicitation of Values," Experimental Economics, Springer, vol. 7(2), pages 123-140, 06.
  5. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
  6. Jack Knetsch & Fang-Fang Tang & Richard Thaler, 2001. "The Endowment Effect and Repeated Market Trials: Is the Vickrey Auction Demand Revealing?," Experimental Economics, Springer, vol. 4(3), pages 257-269, December.
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