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Demand Curve Effects in Experimental Auctions: The Effect of Quantity Already Owned

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  • Colson, Gregory
  • Huffman, Wallace E.
  • Rousu, Matthew C.

Abstract

Most studies utilizing experimental auction mechanisms to elicit consumers’ willingness to pay are designed to avoid potential substitution or demand-curve effects that may influence bid prices. However, previous research and auction designs have not considered the potential impact on bid prices of commodity inventories held by auction participants that were obtained through transactions outside of the auction. This omission may present a problem for interpreting and analyzing auction data. Using bids from a random nth-price auction of fresh vegetables conducted in a laboratory style setting, we test whether participants’ outside inventories affect bidding behavior. We find that bidders do in fact consider their inventories, resulting in lower bid prices by individuals with quantity already owned.

Suggested Citation

  • Colson, Gregory & Huffman, Wallace E. & Rousu, Matthew C., 2009. "Demand Curve Effects in Experimental Auctions: The Effect of Quantity Already Owned," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49551, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea09:49551
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    References listed on IDEAS

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    1. Dickinson, David L. & Bailey, DeeVon, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
    2. Lusk, Jayson L. & Fox, John A., 2003. "Value elicitation in retail and laboratory environments," Economics Letters, Elsevier, vol. 79(1), pages 27-34, April.
    3. John A. Fox & Jason F. Shogren & Dermot J. Hayes & James B. Kliebenstein, 1998. "CVM-X: Calibrating Contingent Values with Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 455-465.
    4. Jay R. Corrigan & Matthew C. Rousu, 2006. "Posted Prices and Bid Affiliation: Evidence from Experimental Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 1078-1090.
    5. Corrigan, Jay R. & Rousu, Matthew C., 2006. "AJAE Appendix: Posted Prices and Bid Affiliation: Evidence from Experimental Auctions," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 88(4), November.
    6. 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.
    7. 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.
    8. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December.
    9. 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.
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    Keywords

    Consumer/Household Economics; Demand and Price Analysis;

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