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The initial endowment effect in experimental auctions revisited: further evidence


  • Lanier Nalley
  • Darren Hudson
  • Gregory Parkhurst


This analysis employs a uniform 4th price sealed-bid auction to test the impact of endowment heterogeneity on participant bids. A mechanism to legitimize the wealth of participants consistent with prior research on endowments is employed. Second, unlike some previous literature, a mechanism to endogenously induce endowment heterogeneity is employed. Results from a Tobit analysis of participant bids indicate that endowment heterogeneity has no significant impact on bidding behaviour. Therefore, it is concluded that when wealth is legitimized within an experiment, bidding behaviour is more likely rational leading to more robust experimental results.

Suggested Citation

  • Lanier Nalley & Darren Hudson & Gregory Parkhurst, 2005. "The initial endowment effect in experimental auctions revisited: further evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 12(1), pages 59-63.
  • Handle: RePEc:taf:apeclt:v:12:y:2005:i:1:p:59-63 DOI: 10.1080/1350485042000307080

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    References listed on IDEAS

    1. Conlin, Michael & Lynn, Michael & O'Donoghue, Ted, 2003. "The norm of restaurant tipping," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 297-321, November.
    2. Dora L. Costa & Matthew E. Kahn, 2003. "Cowards and Heroes: Group Loyalty in the American Civil War," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 519-548.
    3. Cabral, Luis M. B., 2000. "Introduction to Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032864, July.
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    Cited by:

    1. Oparinde, Adewale & Banerji, Abhijit & Birol, Ekin & Perez, Salomon, 2016. "Identifying hypothetical bias in experimental auctions in field settings in developing countries," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246284, African Association of Agricultural Economists (AAAE).
    2. Stephan Kroll & Todd Cherry & Jason Shogren, 2007. "The impact of endowment heterogeneity and origin on contributions in best-shot public good games," Experimental Economics, Springer;Economic Science Association, vol. 10(4), pages 411-428, December.
    3. Dinah Pura T. Depositario & Rodolfo M. Nayga Jr & Yu Yvette Zhang & Robert Dominick E. Mariano, 2014. "Revisiting Cash Endowment and House Money Effects in an Experimental Auction of a Novel Agri-food Product in the Philippines," Asian Economic Journal, East Asian Economic Association, vol. 28(2), pages 201-215, June.
    4. Skuza, Nathan & McCracken, Vicki & Ellis, Joan, 3. "Compensation Fees And Willingness To Pay: A Field Experiment On Organic Apples," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(3).

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