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The Effect of Initial Endowments in Experimental Auctions

  • Jay R. Corrigan
  • Matthew C. Rousu

We report the results of an experiment designed to test whether initial endowments affect value estimates elicited from experimental auctions. Comparing bids for one unit of a good, two units of a good, and a second unit of a good when endowed with the first unit, we find that willingness to pay for the second unit of a good is, on average, as much as 75% higher when endowed with the first unit. We go on to advance two theories that could potentially reconcile our results with neoclassical consumer theory.

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File URL: http://economics.kenyon.edu/corrigan/publications/Initial%20Endowments.pdf
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Paper provided by Kenyon College, Department of Economics in its series Working Papers with number 0601.

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Date of creation: May 2006
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Handle: RePEc:ken:wpaper:0601
Contact details of provider: Web page: http://economics.kenyon.edu/

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