The initial endowment effect in experimental auctions revisited: Further evidence

Lanier Nalley, Darren Hudson, Gregory Parkhurst

Research output: Contribution to journalArticle

7 Scopus citations

Abstract

This analysis employs a uniform 4th price sealed-bid auction to test the impact of endowment heterogeneity on participant bids. A mechanism to legitimize the wealth of participants consistent with prior research on endowments is employed. Second, unlike some previous literature, a mechanism to endogenously induce endowment heterogeneity is employed. Results from a Tobit analysis of participant bids indicate that endowment heterogeneity has no significant impact on bidding behaviour. Therefore, it is concluded that when wealth is legitimized within an experiment, bidding behaviour is more likely rational leading to more robust experimental results.

Original languageEnglish
Pages (from-to)59-63
Number of pages5
JournalApplied Economics Letters
Volume12
Issue number1
DOIs
StatePublished - Jan 15 2005

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