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Is the Experimental Auction a Dynamic Market?

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  • Jay Corrigan

Abstract

Experimental auctions are generally thought of as static markets. This paper presents the results of an experimental auction designed to test whether participants’ perceptions regarding the relative difficulty of delaying or reversing a transaction outside the experimental market systematically affect their willingness-to-pay bids. The results show that auction participants’ perceptions significantly impact their bids in a manner that is consistent with real option theory. These results suggest that economists must be careful to consider the existence of outside markets when designing experimental auctions. Copyright Springer 2005

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  • Jay Corrigan, 2005. "Is the Experimental Auction a Dynamic Market?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(1), pages 35-45, May.
    • Handle: RePEc:kap:enreec:v:31:y:2005:i:1:p:35-45
    DOI: 10.1007/s10640-004-6981-z
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    1. Jason F. Shogren & John A. List & Dermot J. Hayes, 2000. "Preference Learning in Consecutive Experimental Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1016-1021.
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    8. Todd Cherry & Peter Frykblom & Jason Shogren & John List & Melonie Sullivan, 2004. "Laboratory Testbeds and Non-Market Valuation: The Case of Bidding Behavior in a Second-Price Auction with an Outside Option," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(3), pages 285-294, November.
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    11. Jayson L. Lusk, 2003. "An Experimental Test of the Commitment Cost Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1316-1322.
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    15. Elizabeth Hoffman & Dale J. Menkhaus & Dipankar Chakravarti & Ray A. Field & Glen D. Whipple, 1993. "Using Laboratory Experimental Auctions in Marketing Research: A Case Study of New Packaging for Fresh Beef," Marketing Science, INFORMS, vol. 12(3), pages 318-338.
    16. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2002. "Do consumers not care about biotech foods or do they just not read the labels?," Economics Letters, Elsevier, vol. 75(1), pages 47-53, March.
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    18. 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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    2. Rousu, Matthew C. & Marette, Stéphan & Thrasher, James F. & Lusk, Jayson L., 2014. "The economic value to smokers of graphic warning labels on cigarettes: Evidence from combining market and experimental auction data," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 123-134.
    3. Jay Corrigan & Catherine Kling & Jinhua Zhao, 2008. "Willingness to Pay and the Cost of Commitment: An Empirical Specification and Test," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 285-298, June.
    4. Ortega, David L. & Wolf, Christopher A., 2018. "Demand for farm animal welfare and producer implications: Results from a field experiment in Michigan," Food Policy, Elsevier, vol. 74(C), pages 74-81.
    5. Claudia Bazzani & Vincenzina Caputo & Rodolfo M. Nayga JR. & Maurizio Canavari, 2017. "Testing Commitment Cost Theory In Choice Experiments," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 383-396, January.
    6. Corrigan, Jay R. & Rousu, Matthew C., 2008. "Testing Whether Field Auction Experiments Are Demand Revealing in Practice," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(2).
    7. Waldman, Kurt B. & Kerr, John M., 2015. "Is Food and Drug Administration policy governing artisan cheese consistent with consumers’ preferences?," Food Policy, Elsevier, vol. 55(C), pages 71-80.
    8. repec:ken:wpaper:0603 is not listed on IDEAS
    9. Corrigan, Jay R., 2006. "The Reverse Auction: A New Approach to Experimental Auction Valuation," 2006 Annual meeting, July 23-26, Long Beach, CA 21449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. repec:ken:wpaper:0804 is not listed on IDEAS
    11. Lusk, Jayson L. & Norwood, F. Bailey, 2009. "Bridging the gap between laboratory experiments and naturally occurring markets: An inferred valuation method," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 236-250, September.
    12. Lee, Ji Yong & Fox, John A., 2016. "The effects of allowing substitutes on bidding behavior in a private value experimental auction," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235900, Agricultural and Applied Economics Association.

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