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Demand Curve Shifts in Multi-Unit Auctions: Evidence from a Laboratory Experiment

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  • Rousu, Matthew C.
  • Beach, Robert H.
  • Corrigan, Jay R.

Abstract

Basic economic theory predicts that a consumer's willingness to pay for a good is affected by the presence of complements and substitutes. In an auction setting, this theory implies that the presence of complements would increase bid prices for a good, while the presence of substitutes would decrease bid prices for a good. However, several experimental auction studies have sold complementary or substitutable products without regard for the effects these actions could have on bidding behavior. Using data from an experimental auction specifically designed to test the effect of complements and substitutes on bids, we used both unconditional tests and conditional tests where we derived demand flexibilities to analyze whether selling complementary and substitutable products has an effect on bids. Our results show that the availability of complementary and substitutable products affects bids in the expected directions. This finding has important implications for researchers who design experimental auctions.

Suggested Citation

  • Rousu, Matthew C. & Beach, Robert H. & Corrigan, Jay R., 2005. "Demand Curve Shifts in Multi-Unit Auctions: Evidence from a Laboratory Experiment," 2005 Annual meeting, July 24-27, Providence, RI 19513, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19513
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    References listed on IDEAS

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    1. Huffman, Wallace E. & Shogren, Jason F. & Rousu, Matthew C. & Tegene, Abebayehu, 2003. "Consumer Willingness to Pay for Genetically Modified Food Labels in a Market with Diverse Information: Evidence from Experimental Auctions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(03), December.
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    5. Matthew C. Rousu & Wallace E. Huffman & Jason F. Shogren & Abebayehu Tegene, 2004. "Estimating the Public Value of Conflicting Information: The Case of Genetically Modified Foods," Land Economics, University of Wisconsin Press, vol. 80(1), pages 125-135.
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    8. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
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    10. 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.
    11. Roosen, Jutta & Fox, John A. & Hennessy, David A. & Schreiber, Alan, 1998. "Consumers' Valuation Of Insecticide Use Restrictions: An Application To Apples," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(02), December.
    12. 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.
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