Application of Regression Discontinuity Approach in Experimental Auctions: A Case Study of Gaining Participants’ Trust and Their Willingness to Pay

Our research applies regression discontinuity to assess the effects how the introductory lectures influence on participants’ trust and then their WTP in experimental auctions. This method takes advantage of an exogenous threshold or cutoff point to evaluate causal effects. In our research, we consider the participants’ age to be the assignment variable, which is also called as forcing variable. We select a cutoff line in participants’ age and based on the cutoff line, we apply regression discontinuity technique. We conduct several sessions of experiments and we group the participants into two groups, where some participants’ ages are below the cutoff line and the rest are above it. Participants with ages above the cutoff line are exposed to introductory lectures and then the rest participants are not exposed to the lectures. We assume there is a discontinuous jump in their willingness to pay between and after application of introductory lectures. We choose local nonparametric regression (kernel) estimation methods over the global/parametric methods as non-parametric methods exhibits more robustness. We choose several potential bandwidths based on sample size. We also compare the estimation results between with and without covariates.