socially responsible products what motivates consumers to pay a premium abstractthe motivation to pay a premium for socially responsible products is partly an expression of consumer concern for the well being of those involved in the production process buying a product with a socially responsible label and donating to a charity are similarly motivated actions while there is an extensive literature on the economics of charitable giving that examines motivations to donate as well as on the impacts of labelling on consumer demand there is little overlap between the two literatures we bridge these two literatures by investigating whether consumers have heterogeneous motivations for paying a premium through a laboratory experiment that auctions coffee with hypothetical socially responsible labels that put different weights on in kind versus cash transfers we find that those consumers who prefer an in kind transfer paternalistic altruists are willing to pay a 52 5 price premium over standard coffee those who prefer that most of the premium is paid as cash strong altruis

endogenous entry and self selection in private value auctions an experimental study this paper presents the results of an experimental study of endogenous entry in first price independent private value auctions n potential bidders simultaneously decide whether to participate in an auction or receive a known outside option in the second stage entrants submit bids after learning their own private values and the number of entrants an equilibrium model of heterogeneous risk averse bidders implies a self selection effect where bidding in the auction is lower with endogenous entry because only less risk averse bidders enter this effect is confirmed by the experiment we also observe excessive entry relative to the theoretical model

bidding behavior in descending and ascending auctions this research examines how individual differences and institutional practices influence consumer bidding in auctions bidders may be motivated by different goals e g thrill of winning the item with minimal attention to what they pay for it versus prudence winning the item at a price at or below its perceived value also innate or auctioneer induced differences may exist in the precision and salience of bidder cognitions about the item s value we report two studies on how these motivational and cognitive factors influence bids in descending and ascending auctions respectively each study also manipulated a situational variable wait time at each price step the two auctions realized different average prices for the same item set average bids were higher in the descending versus ascending auction in several study conditions in both auction formats bidders primed with thrill versus prudence bid higher but more precise and or salient values attenuated this goal effect among other results in the descending auction longer wait times elicited higher bids from bidders primed with thrill but not prudence in the ascending auction longer wait times produced lower bids for bidders primed with prudence but not thrill these findings on consumer bidding behavior have practical implications for auction design

ten little treasures of game theory and ten intuitive contradictions this paper reports laboratory data for games that are played only once these games span the standard categories static and dynamic games with complete and incomplete information for each game the treasure is a treatment in which behavior conforms nicely to predictions of the nash equilibrium or relevant refinement in each case however a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior these contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others decisions

learning by bidding we analyze a dynamic second price auction with an informed bidder and an uninformed bidder who upon seeing a posted price learns whether his valuation is above that price in the essentially unique equilibrium an informed bidder bids in the first period if her valuation is below some cutoff and bids only in the last period otherwise an uninformed bidder bids in every period to optimally change the price unless the price is above his valuation or he is the high bidder this model also provides a rationale behind the use of a secret reserve price in private value settings

the impact of fair trade certification for coffee farmers in peru smallholder farmers producing for fair trade market outlets are usually considered to benefit from better prices and stable market outlets however many empirical studies verifying this impact suffer from strong selection bias this study uses a balanced sample of fair trade farmers and likewise nonfair trade producers of organic and conventional coffee from peru to compare the net effects on production income and expenditures wealth and investments and attitudes and perceptions after careful matching we find only modest direct income and production effects but significant changes in organization input use wealth and assets and risk attitudes moreover important differences between farmers with early and more recent ft affiliation are registered

war of attrition evidence from a laboratory experiment on market exit i introduction young industries often undergo a process of shakeout gort and klepper 1982 and klepper 1996 attracting excess firms and gradually shedding them over time more mature industries are likewise often forced to contract in the face of recession or product specific negative demand shocks when an overcrowded industry is forced to shrink which firms exit and which ones survive the conventional answer in economics is that overcrowded industries tend to shed inefficient firms and retain efficient ones we might call this survival of the most efficient a process analogous to natural selection that can adaptively improve the efficiency of industries over time nelson and winter 1982 fudenberg and tirole 1986 model firms exit decisions in overcrowded duopoly markets as wars of attrition and show that the intuition of survival of the most efficient has merit even if firms have little information regarding their costs relative to their competitors however the equilibrium of their game is complex involving a solution to a system of differential equations since neither fortune 500 chief executive officers in the naturally occurring markets nor undergraduate participants in laboratory markets deliberately solve differential equations when deciding whether or not to exit a declining market it is an open question as to how well fudenberg and tirole s rational reconstruction of the exit decision corresponds to the facts of how people make such decisions we report the results of a laboratory experiment designed to answer this question nearly 200 subjects in 16 sessions participated in a total of 3 800 wars of attrition based on fudenberg and tirole s model at the beginning of each period subjects were randomly paired and given a private cost draw that usually induced negative net per second payoffs in a shared market and positive net payoffs per second in monopoly subjects then decided in real time whether and when to exit the market never to return monotonic equilibrium strategy functions predict higher cost inefficient participant exit at an earlier time than their lower cost competitor that is the relatively efficient competitor survives in the market we find that fudenberg and tirole s model organizes our data surprisingly well especially considering its complexity we observe exit by the higher cost firm in 76 of cases when differences between the costs faced by firms are substantial the rate of efficient exit rises to nearly 100 the data on exit times are likewise quite close to the point predictions particularly in the crucial higher portion of the cost distribution that generally governs exit times the median deviation from equilibrium exit times falls to zero by the end and on average subjects earn payouts identical to those predicted in equilibrium our design permits tests of two other conjectures in fudenberg and tirole first our data supports fudenberg and tirole s core comparative static prediction that a decrease in the ex ante likelihood of actually being in a war of attrition leads to an increase in the speed of exit 1 second half of our sessions use costs framed as fixed costs suffered while in the market and half use costs framed as opportunity costs earned by exiting the market there is no evidence that this treatment variable affects exit behavior this isomorphism between gains and losses predicted by standard theory stands in stark contrast to evidence from previous individual decision making experiments suggesting asymmetries in how people react to potential losses and potential gains although wars of attrition have an important place in the game theoretic literature there are surprisingly few experimental studies directly relating to them 2 3 bilodeau childs and mestelman 2004 study a three player full information war of attrition framed as a volunteer game and report widespread failure of equilibrium predictions the predicted volunteer in a subgame perfect nash equilibrium only volunteers 41 of the time

lottery choice incentives complexity and decision time this paper reports the results of an experiment on lottery choice in which decision cost is measured as decision making time a simple decision cost model motivates this measurement and the experiment and predicts relationships between incentive mechanism manipulations and decision making time which are borne out in the experiment the decision cost model also suggests that decisions will change in the face of the incentive manipulations in the experiment this suggestion is borne out in a complex decision making environment but not in a simple one specification tests demonstrate that observed changes in subjects behavior are not merely due to changes in subject specific error variance one may conclude from this that the payoff dominance problem is a real issue in complex decision making experiments copyright 1993 by royal economic society

the effect of fair trade affiliation on child schooling evidence from a sample of chilean honey producers we evaluate the impact of fair trade ft affiliation on child schooling within a sample of chilean honey producers with a retrospective panel data approach from a theoretical point of view we argue that ft should have a positive effect on child schooling since it generates a short run pure income effect together with a medium run productivity effect on both adult and child wages on the other hand because of the higher productivity generated by the medium run effect the opportunity cost of child education increases if they work with their parents the direction of the impact of ft affiliation on child schooling is therefore uncertain and requires empirical testing our econometric findings document a positive and significant impact of affiliation years on child schooling after controlling for endogeneity and heterogeneity between the treatment and control sample

an experiment on learning with limited information nonconvergence experimentation cascades and the advantage of being slow abstract we present the results of an experiment on learning in a continuous time low information setting for a dominance solvable version of a cournot oligopoly with differentiated products we find little evidence of convergence to the nash equilibrium in an asynchronous setting characterized by players updating their strategies at different frequencies play tends toward the stackelberg outcome which favors the slower player convergence is significantly more robust for a serial cost sharing game which satisfies a stronger solution concept of overwhelmed solvability as the number of players grows this improved convergence tends to diminish seemingly driven by frequent and highly structured experimentation by players leading to a cascading effect in which experimentation by one player induces experimentation by others these results have implications both for traditional oligopoly competition and for a wide variety of strategic situations arising on the internet

human and nature dynamics handy modeling inequality and use of resources in the collapse or sustainability of societies abstract there are widespread concerns that current trends in resource use are unsustainable but possibilities of overshoot collapse remain controversial collapses have occurred frequently in history often followed by centuries of economic intellectual and population decline many different natural and social phenomena have been invoked to explain specific collapses but a general explanation remains elusive in this paper we build a human population dynamics model by adding accumulated wealth and economic inequality to a predator prey model of humans and nature the model structure and simulated scenarios that offer significant implications are explained four equations describe the evolution of elites commoners nature and wealth the model shows economic stratification or ecological strain can independently lead to collapse in agreement with the historical record the measure carrying capacity is developed and its estimation is shown to be a practical means for early detection of a collapse mechanisms leading to two types of collapses are discussed the new dynamics of this model can also reproduce the irreversible collapses found in history collapse can be avoided and population can reach a steady state at maximum carrying capacity if the rate of depletion of nature is reduced to a sustainable level and if resources are distributed equitably

does resorting to online dispute resolution promote agreements experimental evidence abstract this paper presents an experiment performed to test the properties of an innovative bargaining mechanism called automated negotiation used to resolve disputes arising from internet based transactions the main result shows that the settlement rule tends to chill bargaining as it creates incentives for individuals to misrepresent their true valuations which implies that automated negotiation is not able to promote agreements however this perverse effect depends strongly on the conflict situation when the threat that a disagreement occurs is more credible the strategic effect is reduced since defendants are more interested in maximizing the efficiency of a settlement than their own expected profit the implications of these results are then used to discuss the potential role of public regulation and reputation mechanisms in cyberspace

understanding overbidding in second price auctions an experimental study we present results from second price private value auction spa experiments where bidders may receive noisy signals about their opponentsvalue such signals change biddersperception about the strengthof their opponent and the relationship between biddersperception of their opponent and overbidding provides a novel channel to understand overbidding in spa we found that small and medium overbids are more likely to occur when bidders perceive their rivals to have similar values supporting a modifiedjoy of winninghypothesis but large overbids are more likely to occur when bidders believe their opponents to have much higher values consistent with thespite hypothesis second price private value auctions spas are the most easily understood auction format from a theoretical point of view 1 in standard private value auction models of fully rational bidders with standard preferences bidding one s own value is a weakly dominant strategy this theoretical prediction holds irrespective of biddersrisk atti tudes the number of rival bidders symmetry in the value distributions and so on in laboratory experiments however subjects are found to exhibit a consistent pattern of overbidding kagel et al 1987 found that the actual bids are on average 11 above the dominant strategy bids kagel and levin 1993 found that about 62 of all bids in their five bidder spa sessions exceed the bidder s value while only 8 of all bids were below it both kagel and levin 1993 and harstad 2000 further reported that experience has only a small effect in reducing overbidding in spa an important related finding is that overbidding in english auctions a mechanism that is strategically equivalent to the spa in the case of private values is known to be a short term phenomenon that subjects quickly learn not to undertake kagel and levin 1993 thus any explanation for the prevalence and persistence of overbidding in the spa must also explain its rarity in the english auction given the robustness of the findings of overbidding in spa it is surprising that economists have little understanding of why it happens kagel et al 1987 conjectured that bidding above one s own value in a spa is based on the illusion that it improves the probability of winning with little cost because the winner only pays the second highest bid 2 moreover they argue that overbidding is sustainable because bidders still on average earn positive profits and because the negative feedback from overbidding is a weak mechanism in the spa for example if a bidder overbids in a spa by 10 above her value it is quite possible that she does not win at all and thus does not experience

a comparison of buyer determined and price based multiattribute mechanisms reverse auctions are fast becoming the standard for many procurement activities in the past the majority of such auctions have been solely price based but increasingly attributes other than price affect the auction outcome specifically the buyer uses a scoring function to compare bids and the bid with the highest score wins we investigate two mechanisms commonly used for procurement in business to business markets in a setting in which buyers welfare is affected by exogenous nonprice attributes such as the quality service and past relationships under both mechanisms bidders bid based on price but in the buyer determined mechanism the buyer is free to select the bid that maximizes her surplus while in the price based mechanism the buyer commits to awarding the contract to the low price bidder we find both in theory and in the laboratory that the buyer determined mechanism increases the buyer s welfare only as long as enough suppliers compete if the number of suppliers is small and the correlation between cost and quality is low the buyer is better off with the price based mechanism these findings are intended to help procurement managers make better decisions in designing procurement mechanisms for a variety of settings

bargaining and value we present and analyze a model of noncooperative bargaining among n participants applied to situations describable as games in coalitional form this leads to a unified solution theory for such games that has as special cases the shapley value in the transferable utility tu case the nash bargaining solution in the pure bargaining case and the recently introduced maschler owen consistent value in the general nontransferable utility ntu case moreover we show that any variation in a certain class of our bargaining procedure which generates the shapley value in the tu setup must yield the consistent value in the general ntu setup

comparative study of one bid versus two bid auctions abstract the paper focuses on a comparative investigation of the standard one bid first price auction and a corresponding two bid auction where each buyer may place two bids a high bid and a low one and the winner pays his low bid if this was higher than all other bids we characterize the equilibria of the two mechanisms and prove some results on the ranking of revenues for the symmetric case we show that subjects in an experiment prefer the two bid over the one bid auction when given the possibility of choosing between the two and compare the observed behavior to the theoretical predictions

testing for risk aversion a stochastic dominance approach we conduct an experiment based on the stochastic dominance framework in order to investigate risk aversion in isolation of other effects such as subjective probability distortion the certainty effect and framing effects the result is striking most individuals are not risk averse 2001 elsevier science b v all rights reserved

faith based charity and crowd out during the great depression abstract interest in religious organizations as providers of social services has increased dramatically in recent years churches in the u s were a crucial provider of social services through the early part of the twentieth century but their role shrank dramatically with the expansion in government spending under the new deal in this paper we investigate the extent to which the new deal crowded out church charitable spending in the 1930s we do so using a new nationwide data set of charitable spending for six large christian denominations matched to data on local new deal spending we instrument for new deal spending using measures of the political strength of a state s congressional delegation and confirm our findings using a different instrument based on institutional constraints on state relief spending with both instruments we find that higher government spending leads to lower church charitable activity crowd out was small as a share of total new deal spending 3 but large as a share of church spending our estimates suggest that benevolent church spending fell by 30 in response to the new deal and that government relief spending can explain virtually all of the decline in charitable church activity observed between 1933 and 1939

robustness of bidder preferences among auction institutions i introduction the answer to the question of how bidders choose to enter one auction versus an alternative competing auction is important to understand in providing a complete picture of the nature of endogenous entry decisions into auctions the issue of how a bidder chooses which among alternative auctions to enter as well as whether to enter an auction at all is of substantial importance to auctioneers attempting to attract bidders to their auctions there is a growing literature addressing issues in endogenous entry in auctions there are several papers such as engelbrecht wiggans 1993 pevnitskaya 2004 and palfrey and pevnitskaya 2008 that consider the decision of whether to enter an auction or not and study the effect of endogenous entry on bidding behavior there is a much larger group for example harstad 1990 engelbrecht wiggans 1993 levin and smith 1994 mcafee 1993 and mcafee and mcmillan 1987 that considers competition between auctioneers in which the auctioneers are competing along some characteristic such as entry price we consider the case in which auctioneers may be competing with each other based on the choice of auction mechanism our interest is in the degree to which the auction mechanism itself might impact the entry decisions of potential bidders of course there would be a direct pecuniary impact of the mechanism in that bidders should be more likely to enter auction mechanisms that they believe allow them to get lower prices but there may be other cognitive issues in regard to the structure of the mechanism that may also impact the choice behavior in ivanova stenzel and salmon iss 2004a we introduced an experimental design aimed at eliciting and measuring preferences subjects might possess for different auction institutions and applied the design to testing bidder preferences between ascending a dynamic mechanism and sealed bid first price a static mechanism auctions it seems reasonable to expect bidders to have preferences between these two auction mechanisms due to the strategic differences between them in a first price auction the winner pays a price equal to his own bid whereas in the ascending auction he pays a price that is an increment above the second highest bid these differences might result in difficulty of deciding how to bid and in the possibility of experiencing some form of regret 1 the design involved having subjects make a choice between entering into a two bidder sealed bid first price auction versus a two bidder ascending auction each with different entry prices by varying the entry prices we could measure the subjects willingness to pay for either auction our main finding in the paper was that while subjects exhibited strong preferences for the ascending auction at equal entry prices they were not willing to pay up to the expected profit difference between the two auctions to participate in an ascending auction thus they ended up entering the supposedly less preferred sealed bid first price auction even in situations in which they would expect to make a higher net surplus including the cost of the entry fee by entering into the ascending auction instead that paper proposed one possible answer to the puzzle that involved assuming that bidders were risk averse in their bidding behavior and then risk averse to the same degree in their auction choice behavior this explanation worked because neither risk averse nor approximately risk neutral bidders should be expected to pay much to enter into an ascending auction instead of a sealed bid first price auction just as we observed in the experiment for the most risk averse bidders this is because while they bid the highest in the first price auction and therefore expected little surplus in the event that they win they consequently end up winning with higher probability than less risk averse bidders this is a trade off risk a verse bidders are willing to accept and consequently it is easy to show that highly risk averse bidders should not be willing to pay much to get into the more lucrative though risky ascending auction

the high low divide self selection by values in auction choice abstract most prior theoretical and experimental work involving auction choice has assumed bidders find out their value after making a choice of which auction to enter we examine whether or not bidders knowing their value prior to making a choice of which among multiple alternative auction formats to enter impacts their choice decision and or the outcome of the auctions the results show a strong impact on auction choice subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often the number of bidders in each auction revenue efficiency and average bidder surplus all end up equalized

english auctions with resale an experimental study i design and test a simple english auction and two english auctions with resale but with different informational backgrounds all three treatments theoretically have the same equilibrium i find however that the possibility of resale alters behavior significantly in the two treatments with resale subjects deviated from both the nash prediction and the common results about bidding behavior in english auctions subjects tend to overbid when they are certain they can reap the whole surplus in the resale market i employ different models like qre and levels of reasoning and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants that is as rational decision making when anticipating others to make errors when the outcome of the resale market is not certain there is significant signaling behavior and auction prices tend to be lower than the nash prediction

are you risk averse over other people s money decisions with uncertain outcomes are often made by one party in settings where another party bears the consequences whenever an individual is delegated to make decisions that affect others such as in the typical corporate structure does the individual make decisions that reflect the risk preferences of the party bearing the consequences we examine this question in two simple settings lottery choices and sealed bid auctions using controlled laboratory experiments we find that when an individual makes a decision for an anonymous stranger there is a tendency to exhibit less risk aversion this reduction in risk aversion is relative to his or her own preferences and it is also relative to his or her belief about the preferences of others this result has significant implications for the design of contracts between principals and agents

equilibrium binding agreements abstract we study equilibrium binding agreements the coalition structures that form under such agreements and the efficiency of the outcomes that result we analyze such agreements in a context where the payoff to each player depends on the actions of all other players thus a game in strategic form is a natural starting point unlike the device of a characteristic function explicit attention is paid to the behavior of the complementary set of players when a coalition blocks a proposed agreement a solution concept and its applications are discussed journal of economic literature classification numbers c70 c71

an experimental test of the commitment cost theory are used in making public policy recommendations carrying out cost benefit analysis and formulating marketing and pricing strategies unlike traded goods individuals are not likely familiar with valuing and pricing nonmarket goods as such a key characteristic among almost all nonmarket goods is uncertainty regarding value that individuals have uncertainty regarding the value they have for nonmarket goods is supported by a number of recent empirical findings e g johannesson et al loomis and ekstrand van kooten krcmar and bulte among other things uncertainty may be a result of unfamiliarity with the good in question for example a poll of scottish individuals found that over 70 were unfamiliar with

eliciting subjective probabilities with binary lotteries abstract we evaluate a binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task prior research has shown this procedure to robustly induce risk neutrality when subjects are given a single risk task defined over objective probabilities drawing a sample from the same subject population we find evidence that the binary lottery procedure also induces linear utility in a subjective probability elicitation task using the quadratic scoring rule we also show that the binary lottery procedure can induce direct revelation of subjective probabilities in subjects with popular non expected utility preference representations that satisfy weak conditions

learning to bid the design of auctions under uncertainty and adaptation we examine auction design in a context where symmetrically informed adaptive agents with common valuations learn to bid for a good despite the absence of private valuations asymmetric information or risk aversion bidder strategies do not converge to the bertrand nash equilibrium strategies even in the long run deviations from equilibrium strategies depend on uncertainty regarding the value of the good auction structure the agents learning model and the number of bidders although individual agents learn nash bidding strategies in isolation the learning of each agent by flattening the best reply correspondence of other agents blocks common learning these negative externalities are more severe in second price auctions auctions with many bidders and auctions where the good has an uncertain value ex post

collusion in uniform price auctions experimental evidence and implications for treasury auctions in uniform price auctions of shares there exist collusive equilibria in which bidders capture the entire surplus from the auction as well as competitive equilibria in which the auctioneer captures the entire surplus from the auction we provide experimental evidence that in uniform price auctions non binding pre play communication facilitates convergence to collusive equilibrium outcomes on the other hand regardless of the opportunities for communication in discriminatory auction experiments subject strategies conform closely with the unique equilibrium in undominated strategies in which bidders gains are equal to the smallest tick size in the bidding schedule this evidence suggests that uniform price auctions of treasury securities may result in lower revenues than the currently employed discriminatory procedure

consumers valuation of sustainability labels on meat there are various sustainability certifications and claims for food products that focus on environmental or ethical benefits these claims empower consumers to make informed purchasing decisions that take environmental and ethical considerations into account this paper compares consumers preferences for four types of sustainability claims related to organic meat free range animal welfare and carbon footprint using a choice experiment on a chicken breast product our results show that nine in every ten belgian consumers favor free range claims which are also valued the most highly attracting premiums ranging from 43 to 93 our study also shows that a vast majority of consumers 87 would welcome the introduction of an eu level animal welfare label the carbon footprint labels and the organic labels are less appealing to consumers who have lower willingness to pay for these labels belgian consumers prefer the national belgian organic food logo certified by a private organization to the newly introduced eu organic food logo

auctions with toeholds an experimental study of company takeovers we run experiments on english auctions where the bidders already own a part toehold of the good for sale the theory predicts a very strong explosive effect of even small toeholds while asymmetric toeholds do have an effect on bids and revenues in the lab which gets stronger the larger the asymmetry it is not nearly as strong as predicted we explain this by analyzing the flatness of the payoff functions which leads to large deviations from the equilibrium strategies being relatively costless this is a general fundamental weakness of this type of explosive equilibria which makes them fail when human players are involved our analysis shows that a levels of reasoning model explains the results better where this equilibrium fails moreover we find that although big toeholds can be effective in a takeover battle the cost to acquire them might be higher than the strategic benefit they bring

learning to bid an experimental study of bid function adjustments in auctions and fair division games we examine learning behaviour in auction and fair division experiments with independent private values under two different price rules first and second price participants play all four games repeatedly and submit complete bid functions rather than single bids this allows us to study how institutional changes are anticipated and whether learning is influenced by the structural differences between games we find that learning does not drive bidding towards the benchmark solution bid functions are adjusted globally rather than locally directional learning theory offers a partial explanation for bid changes the data support a cognitive approach to learning

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

present bias quasi hyperbolic discounting and fixed costs in this paper we elicit preferences for money time pairs via experimental techniques we estimate a general specification of discounting that nests exponential and hyperbolic discounting as well as various forms of present bias including quasi hyperbolic discounting our experimental data do not appear peculiar in any dimension in particular we find clear evidence for present bias as most of the previous literature however no evidence for quasi hyperbolic discounting is found and the data strongly favor instead a specification with a small present bias in the form of a fixed cost of the order of 4 on average across subjects with such a fixed cost the curvature of discounting is imprecisely estimated and exponential discounting is hardly rejected in this specification the present bias tends to vanish for economically relevant monetary rewards

overbidding and overspreading in rent seeking experiments cost structure and prize allocation rules we study experimentally the effects of cost structure and prize allocation rules on the performance of rent seeking contests most previous studies use a lottery prize rule and linear cost and find both overbidding relative to the nash equilibrium prediction and significant variation of efforts which we term overspreading we investigate the effects of allocating the prize by a lottery versus sharing it proportionally and of convex versus linear costs of effort while holding fixed the nash equilibrium prediction for effort we find the share rule results in average effort closer to the nash prediction and lower variation of effort combining the share rule with a convex cost function further enhances these results we can explain a significant amount of non equilibrium behavior by features of the experimental design these results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

inducing risk neutral preferences with binary lotteries a reconsideration abstract we evaluate the binary lottery procedure for inducing risk neutral behavior we strip the experimental implementation down to bare bones taking care to avoid any potentially confounding assumptions about behavior having to be made in particular our evaluation does not rely on the assumed validity of any strategic equilibrium behavior or even the customary independence axiom we show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes and that the binary lottery procedure does indeed induce a statistically significant shift toward risk neutrality this striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment

price formation in single call markets this paper reports a laboratory experiment designed to examine the price formation process in a simple market institution the single call market the experiment features random values and costs each period so each period generates a new price formation observation other design features are intended to enhance the predictive power of the bayesian nash equilibrium bne theory developed recently for this trading institution we find that the data support several qualitative implications of the bne but that subjects bid and ask behavior is not as responsive to changes in the pricing rule as the bne predictions bids and asks tend to reveal more of the underlying values and costs than predicted particularly when subjects are experienced nevertheless observed trading efficiency falls below the bne prediction the results offer more support for the bne when subjects compete against nash robot opponents a simple learning model accounts for several of the deviations from bne

a comparison of multiple unit all pay and winner pay auctions under incomplete information this article examines the properties of independent private value all pay and winner pay auctions when there are multiple units sold we study bidding behavior efficiency and revenue in a set of 23 experimental sessions our data show that the all pay auction and the winner pay auction are empirically revenue equivalent though both yield higher revenue than the risk neutral bayesian equilibrium our evidence also suggests that the winner pay auction is more likely to lead to a pareto efficient allocation than the all pay auction

information feedback in first price auctions i apply the notion of a self confirming equilibrium sce to study how feedback in first price auctions influences bidders perceptions about their strategic environment and consequently their bidding behavior in a private values setting revealing the two highest bids at the end of each auction is sufficient for bidders to have correct beliefs justifying the assumption of nash equilibrium in contrast in every symmetric sce of a symmetric affiliated private values model bidding strategies and revenue are weakly higher if only the highest bid is revealed i also consider interdependent valuations and discuss implications for the empirical auction literature

subjective probabilities in games an application to the overbidding puzzle this article illustrates how the joint elicitation of subjective probabilities and preferences may help us understand behavior in games we conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first price auctions the experimental outcomes indicate that subjects underestimate their probability of winning the auction and indeed overbid when provided with feedback on the precision of their predictions subjects learn to make better predictions and to curb significantly overbidding the structural estimation of different behavioral models suggests that biased probabilistic beliefs are a driving force behind overbidding and that risk aversion plays a lesser role than previously believed

risk aversion and the winner s curse this article analyzes an auction in which bidders see independent components of a common prize value the nash equilibrium for two rational bidders is shown to be independent of risk attitudes the information structure allows explicit calculation of an alternative equilibrium in which naive bidders do not correctly discount the value of the prize contingent on winning and thus they suffer the winner s curse subjects in a laboratory experiment clearly fall prey to the winner s curse the data conform most closely to the predictions of the naive model moreover the level of risk aversion implied by fitting the naive model is similar to an independent risk aversion measure obtained in a separate private value bidding exercise

theory and misbehavior of first price auctions comment glenn harrison s recent 1989 article in this review has provoked the loudest debate yet heard among experimental economists his critique of the james cox vernon smith and james walker 1983a b 1985a b 1988 henceforth csw laboratory studies of first price sealed bid auctions with independent and private values in my view raises a fundamental methodological issue that is well worth debating and the csw research program deserves further discussion in this short comment i confine myself to what i see as the most important issues and do not try to address all evidence relevant to the ongoing debate first i summarize harrison s central argument very briefly after pointing out two shortcomings in harrison s specific analysis of csw i propose a methodological reconciliation finally and with some trepidation since my own experience with the auction data is relatively slight i suggest an alternative approach to understanding the anomalies discovered by csw

auction choice for ambiguity averse sellers facing strategic uncertainty abstract the robustness of the bayes nash equilibrium prediction for seller revenue in auctions is investigated in a framework of interdependent valuations generated from independent signals seller expected revenue may fall well below the equilibrium prediction even though the individual payoff consequences of suboptimal bidding may be small for each individual bidder this possibility would be relevant to a seller who models strategic uncertainty as ambiguity and who is ambiguity averse in the sense of gilboa and schmeidler it is shown that the second price auction is more exposed than the first price auction to lost revenue from the introduction of bidder behavior with small payoff errors

monetary rewards and decision cost in experimental economics a survey of thirty one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows 1 several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models 2 in virtually all cases rewards reduce the variance of the data around the predicted outcome this is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction

rewards experience and decision costs in first price auctions consistent with a model of asymmetric risk aversion subjects in first price auctions consistently bid above the risk neutral nash prediction it has been argued that this is due to low opportunity cost of deviating from the risk neutral bid we increase opportunity cost and payoff levels by factors of 0 1 5 10 and 20 from the normal levels generating payoffs up to 250 for risk neutral subjects and observe an insignificant increase in the slope of individual bid functions the rmse of bids declines significantly this is consistent with a reward decision cost model of bidding behavior

econometrics of first price auctions in this paper we propose an estimation method for the empirical study of theoretical auction models we focus on first price sealed bid and descending auctions and we adopt the private value paradigm where each bidder is assumed to have a different private value only known to him for the object that is auctioned following mcfadden 1989 and pakes and pollard 1989 our proposed method is based on simulations specifically the method relies on a simulated nonlinear least squares objective function appropriately adjusted so as to obtain consistent estimates of the parameters of interest we illustrate the proposed method by studying a market of agricultural products where descending auctions are used our analysis takes into account heterogeneity of the auctioned objects and the fact that only the winning bid is observed we estimate the parameters that characterize the distribution of the unobserved private values for each auctioned object

the gender difference in the value of winning we design an all pay auction experiment in which we reveal the gender of the opponent using this design we find that women bid higher than men but only when bidding against other women these findings interpreted through a theoretical model incorporating differences in risk attitude and the value of winning suggest that women have a higher value of winning than men

population monotonic allocation schemes for cooperative games with transferable utility abstract an allocation scheme for a cooperative game specifies how to allocate the worth of every coalition it is population monotonic if each player s payoff increases as the coalition to which he belongs grows larger we show that essentially a game has a population monotonic allocation scheme pmas if and only if it is a positive linear combination of monotonic simple games with veto control a dual characterization is also provided sufficient conditions for the existence of a pmas include convexity and increasing average marginal contributions if the game is convex its extended shapley value is a pmas classification number 026

secession and value abstract a model with random proposals where secession of coalitions is the only threat yields exploitative allocations if proposals for coalition s involve randomization the responders pay off vector consists of shapley values for coalition sizes ranging from 1 to s 1

measuring regional diversification of environmental externalities in agriculture and the effectiveness of their reduction by eu agri environmental programs in poland abstract the problem of externalities is an important aspect of contemporary discussion about the directions of agricultural development and agricultural policy nonetheless measuring agri environmental externalities is a difficult task and rarely undertaken in scientific research in our research we have constructed a synthetic indicator that allows measuring agri environmental externalities at the regional level taking into account both positive and negative effects at the same time we also studied the extent to which our synthetic indicator can be used to inform about the effectiveness of subsidies paid to farmers in the european union under agri environmental programs in reduction of externalities generated by agriculture we concluded that the use of subsidies under agri environmental programs has a positive impact on reducing externalities generated by agricultural production measured by our indicator

preference reversal real world lotteries and lottery interested subjects prefer lce reversal or choice reservation price inconsistency has been documented experimentally for zrtain types of lotteries we argue that the relevance of these findings for realworld markets is uncertain because the type of objects used cannot exist on a market and because the extent to which the subjects had any real interest in the objects is unknown using reai world lotteries we have tested choice price consistency on subjects who prefer lotteries ta cash preference reversal was observed but the frequency was much lower than in earlier experiments there were no differences between subjects who qualified as lottery interested and those who did not 1 intmduction

theory and misbehavior in first price auctions comment in his recent paper in this review glenn harrison 1989 argues that the conclusions of james cox et al 1982 1983 1985 1988 in their studies of first price private value auctions are not well supported because of shortcomings in the way their experimental investigations were designed analyzed and reported harrison argues that the expected cost of deviations from risk neutral nash equilibrium rnne bidding in these auctions was quite small less than 0 05 at the median so that in terms of expected monetary payoffs payoff space many subjects had little to lose from deviating from the rnne strategy harrison suggests that the significance of the differences cox vernon smith and james walker hereafter csw report between subjects bids and the rnne bids deviations in the message space may therefore need to be reexamined in discussing harrison versus csw we have three primary points to make first in arguing that it is more natural to evaluate subject behavior in expected payoff space harrison 1989 p 749 we think harrison has overstated his case however we agree with his more important point that looking at the cost of deviations is a useful diagnostic tool for determining when experimenters are likely to have lost control over subjects incentives further as we will show in section i this part of harrison s critique applies with special force to csw s studies of bidding second a broader examination of the results of private value auction experiments indicates that risk aversion cannot be the only factor and may well not be the most important factor behind bidding above the rnne found so often in first price privatevalue auctions the most telling evidence here is bidding above the dominant bid price found in second price auctions kagel et al 1987 kagel and levin 1990 and the risk loving found under several treatment conditions in csw s 1984 own multipleunit discriminative auctions auctions in which the high bidders pay their bid price these and other data inconsistent with risk averse bidding are largely ignored in csw 1988 but are nevertheless relevant to the substantive issue of risk aversion in private value auctions they are discussed in section ii third there are data gathered in other investigations which provide strong support for the view that the deviations from rnne bidding reported in first price auctions are not the results of the low expected cost of such deviations however these data unlike the higher stakes payoff data that csw offer in response to harrison are not consistent with csw s subsidiary conclusions that the data can be well accounted for by a narrow class of risk aversion parameters for the bidders together with the assumption that all agents are playing a nash equilibrium of the resulting game of incomplete information a key difference between these experiments and csw s is that if subjects do not respond to csw s treatment condition increasing the payoffs from experimental to u s dollars their behavior will be consistent with csw s theory in contrast department of economics university of pittsburgh pittsburgh pa 15260 we thank jack ochs and emilie roth for thoughtful discussions on earlier drafts of the paper jim cox and glenn harrison for helpful comments on the initial draft of the paper susan garvin for research assistance and ray battalio carl kogut and don meyer for providing us with access to their data research support was provided by the information science and technology and economics divisions of the national science foundation the alfred p sloan foundation and the russell sage foundation the usual caveat applies with special force iwe do not respond to specific comments that csw 1992 make in response to our comment as in order to avoid indefinite regress the ground rules for this debate required us to comment on csw s criticism of harrison after which they would be given the opportunity to respond to our comment

the effects of payoff magnitude and heterogeneity on behavior in 2 2 games with unique mixed strategy equilibria the logit version of quantal response equilibrium predicts that equilibrium behavior in games will vary systematically with payoff magnitudes if all other factors are held constant including the nash equilibria of the game we explore this in the context of a set of asymmetric 2x2 games with unique totally mixed strategy equilibria the data provide little support for the payoff magnitude predictions of the logit equilibrium model we extend the theoretical quantal response equilibrium model to allow for heterogeneity and find that the data fit the heterogeneous version of the theory significantly better

bidding in private value auctions with uncertain values abstract auctions are often used to sell idiosyncratic goods difficult for potential bidders to value ex ante laboratory auctions with uncertainty over final values in this experiment resulted in 18 and 27 of bids above the expected value of the item in private value first price and english auctions respectively risk seeking preferences as measured on an individual decision task cannot explain overbidding and the first price auction results suggest that risk aversion may not be a good explanation for bidding behavior observed with certain values several candidate explanations fail to explain overbidding rather it appears to stem from some bidders who are prone to overbidding relative to first price auctions the size and frequency of overbids are significantly larger in english auctions while more english auctions are won by overbidders differences between the formats appear to be driven by the dynamic nature of english auctions which is consistent with popular notions of auction fever

a flexible assurance bonding system for improved environmental management abstract current methods of regulating activities that are known or suspected to be environmentally danaging are not working well they induce legal confrontation obfuscation and government intrusion into the inner workings of firms they tend to suppress technical and social innovation aimed at long term solutions they do not mesh well with the market signals that firms use to make decisions this paper discusses some of the underlying reasons for this problem and outlines a flexible environmental assurance bonding system designed to incorporate environmental criteria and uncertainty into the market system and to induce positive environmental technological innovation in addition to direct charges for known environmental damages an assurance bond equal to the current best estimate of the largest potential future environmental damages would be levied and kept in an interest bearing escrow account the bond plus a portion of the interest would be returned if and only if the firm could prove that the suspected damages had not occured or would not occur if damages did occur the bond would be used to rehabilitate or repair the environment and to compensate injured parties by requiring the users of environmental resources to post a bond adequate to cover potential future environmental damages with the possibility for refunds the burden of proof is shifted from the public to the resource user and a strong economic incentive is provided to research the true costs of environmentally innovative activities and to develop innovative cost effective pollution control technologies

individual behavior of first price auctions the importance of information feedback in computerized experimental markets abstract this article reports the results of an individual choice experiment designed to test the nash equilibrium predictions of the first price sealed bid auction a subject faced in 100 auctions always the same resale value and competed with computer simulated bids the design used between subjects variation and involved information feedback as the treatment variable earlier experimental work on first price auctions has frequently reported an overbidding relative to the risk neutral nash equilibrium our data provide evidence that overbidding can be fostered by the standard information feedback in auction experiments which after each auction reveals the winning bid only by means of learning direction theory we explain the individual bidding dynamics in our experiment finally we apply impulse balance theory and make long run predictions of individual bidding behavior

if agricultural land taxation is so efficient why is it so rarely used the land tax enjoys a distinguished pedigree in the theoretical literature on tax efficiency yet it is rarely used as a serious revenue source in rural areas of developing countries this article considers three drawbacks of the land tax relative to taxes on exports or marketed output 1 capitalization effects of the land tax impose a large burden on the current generation 2 land taxation increases the riskiness of net farmer income and 3 administration of the land tax entails costly informational requirements this article demonstrates that only the second and third drawbacks are valid economic arguments against the land tax simulations based on an economic model of farm behavior suggest that farmers may still prefer a land tax to an export tax despite the increased uncertainty of their after tax income administrative costs are therefore the best explanation of the weak link between the theoretical and practical aspects of land taxation

combinatorial clock auctions price direction and performance abstract the lack of price guidance towards efficiency relevant packages in ascending combinatorial clock auctions acca can lead to a low efficiency allocation of goods we propose a descending price combinatorial clock auction dcca with a newly devised pricing strategy to improve on this problem using agent based simulations we document that the dcca provides significant improvements over the acca and we are able to understand in which environments these improvements are likely to be the strongest we test these predictions in the laboratory with human subjects and find evidence that the dcca generates improvements in auction efficiency and revenue

opportunity cost inattention and the bidder s curse abstract auction winners sometimes suffer a bidder s curse paying more for an item at auction than the fixed price charged for an identical item by other sellers this seemingly irrational behavior is puzzling because the information necessary to avoid overpaying would appear to be readily available to bidders yet they seem to ignore it to understand this behavior we consider the bidders decisions whether to acquire information about the fixed price before bidding in the presence of opportunity costs our theory introduces costly information acquisition into an auction model with a fixed price aftermarket selling an identical good when information about the fixed price is costly bidders sometimes remain rationally ignorant and overbid in the auction generating the bidder s curse to assess the empirical validity of our proposed explanation we study the model s predictions in an experiment where subjects have an opportunity cost of looking up a fixed price and bid in an auction we find that information acquisition decreases and overbidding increases with opportunity cost as predicted most observed lookup behavior is rationalizable and rational ignorance reliably generates the bidder s curse

introduction to experimental game theory the title experimental game theory refers to experiments whose goal is to learn about general principles of strategic behavior as opposed to the performance of specific institutions twenty five years ago it would have been startling to see experimental modifying game theory in this way or to find an entire issue of an economics journal devoted to game experiments if this now seems natural it is a tribute to the increasingly

do fair trade and eco labels in coffee wake up the consumer conscience abstract in this study a face to face survey was conducted in order to reveal consumer preferences for ethical and environmentally sound labeling programs in coffee valuation questions regarding the fair trade shade grown and organic coffee labels were asked using a payment card format after consumers were previously informed about each of the labeling programs results suggest that consumers are very receptive toward both fair trade and shade grown coffee labels and consequently are willing to pay higher premiums for these labeling programs than for the organic coffee

directed giving evidence from an inter household transfer experiment abstract we investigate the determinants of giving in a lab in the field experiment with large stakes study participants in urban mozambique play dictator games where their counterpart is the closest person to them outside their household when given the option dictators do a large fraction of giving in kind in the form of goods rather than cash in addition they share more in total when they have the option of giving in kind compared to giving that can only be in cash qualitative post experiment responses suggest that this effect is driven by a desire to control how recipients use gifted resources standard economic determinants such as the rate of return to giving and the size of the endowment also affect giving but the effects of even large changes in these determinants are significantly smaller than the effect of the in kind option our results support theories of giving where the utility of givers depends on the composition not just the level of gift recipient expenditures and givers thus seek control over transferred resources

an experimental investigation of the seller incentives in the epas emission trading auction the clean air act requires the epa to conduct annual auctions of emission allowances under the discriminative auction rules sellers with the lowest asking prices receive the highest bids this paper studies an inverted version of this auction in which buyers face the same incentives as sellers in the epa auction consistent with theoretical predictions buyers bid above their valuation auction outcomes are inefficient and increasing the number of buyers increases bids buyers facing human opponents compete more aggressively than the risk neutral prediction but bids do not differ systematically from this prediction when buyers face computerized nash robots copyright 1995 by american economic association

governance and contract choice theory and evidence from groundwater irrigation markets abstract this paper examines the role governance institutions play in the adoption of contracts we develop a simple model of the contracting relationship in a setting where unverifiable outcomes exist and use it to interpret data on groundwater irrigation contracts in bangladesh a distinguishing feature of this market is the variety of village level institutions which impose different degrees of punishment for contract violation consistent with the model we find households adopt contracts that rely on unverifiable outcomes which are not formally contractible when punishment for contract violation is weak conversely households adopt contracts that rely on formally contractible and verifiable outcomes when punishment is severe this evidence is consistent with contract terms being chosen optimally given what is or is not formally contractible

using laboratory experimental auctions in marketing research a case study of new packaging for fresh beef this paper illustrates the use of laboratory experimental auctions in a pretest market research program for new products we review the experimental auctions literature discuss the range of auction mechanisms available and present the advantages and disadvantages of using a particular mechanism for a laboratory pretest market we then present a step by step example of how a theoretically incentive compatible auction mechanism fifth price sealed bid was used in a laboratory pretest market for vacuum packaged beef based on the illustration we discuss the potential for using laboratory experimental auctions in pretest market research we present the limitations that may be encountered in such applications and outline research aimed at improving the behavioral properties of the technique

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

rationalizable bidding in first price auctions abstract we analyze the consequences of strategically sophisticated bidding without assuming equilibrium behavior in particular we characterize interim rationalizable bids in symmetric first price auctions with interdependent values and affiliated signals we show that 1 every nonzero bid below the equilibrium is rationalizable 2 some bids above the equilibrium are rationalizable 3 the upper bound on rationalizable bids of a given player is a nondecreasing function of her signal in the special case of independent signals and quasi linear valuation functions i the least upper bound on rationalizable bids is concave hence ii rationalizability implies substantial proportional shading for high valuations but is consistent with negligible proportional shading for low valuations we argue that our theoretical analysis may shed some light on experimental findings about deviations from the risk neutral nash equilibrium

preference reversals the impact of truth revealing monetary incentives researchers vigorously debate the impact of incentives in preference reversal experiments do incentives alter behavior and generate economically consistent choices lichtenstein and slovic 1971 document inconsistencies reversals in revealed preference in gamble pairs across paired choice and individual pricing tasks the observed pattern is inconsistent with stable underlying preferences expressed with simple errors lichtenstein and slovic 1973 and grether and plott 1979 introduce incentives but aggregate reversal rates change little these results fostered numerous replications and assertions that models of non stable preferences are required to explain reversals contrary to this research we find that incentives can generate more economically consistent behavior our reevaluation of existing experimental data shows that incentives have a clear impact by better aligning aggregate choices and prices the effect is sufficiently large that with truth revealing incentives a stable preferences with error model not only explains behavior but fits the data as well as any model possibly could

impulse balance equilibrium and feedback in first price auctions abstract experimental sealed bid first price auctions with private values in which feedback on the losing bids is provided yield lower revenues than auctions where this feedback is not given the concept of weighted impulse balance equilibrium which is based on a principle of ex post rationality and incorporates a concern for social comparison captures the data

estimating individual discount rates in denmark a field experiment we estimate individual discount rates with respect to time streams of money using controlled laboratory experiments these discount rates are elicited by means of field experiments involving real monetary rewards the experiments were carried out across denmark using a representative sample of 268 people between 19 and 75 years of age individual discount rates are estimated for various households differentiated by socio demographic characteristics such as income and age our conclusions are that discount rates are constant over the 12 month to 3 year horizons used in these experiments and that discount rates vary substantially with respect to several socio demographic variables hence we conclude that it would be reasonable to assume constant discount rates for specific household types but not the same rates across all households

reserve price effects in auctions estimates from multiple regression discontinuity designs i introduction online auctions are an important trading mechanism in modern economies ebay alone has 81 million active users worldwide and auctions a billion objects annually ebay 2009 as data from auction settings has become accessible especially from online auction environments there has been a surge in empirical analysis testing whether the behavior of buyers and sellers is consistent with auction theory bajari and hortacsu 2004 we contribute to this empirical literature by presenting evidence from 260 000 online auctions of second hand cars that took place between january 2003 and november 2008 we identify the impact of a common feature of online and offline auctions public reserve prices on a rich set of auction outcomes 1 to establish causality we present evidence from multiple regression discontinuity rd research designs an empirical method that has not been used in the earlier literature to test the predictions of auction theory guided by theory we first identify the impact of reserve prices on various standard margins of bidder s behavior such as their entry into auctions bidding behavior within the auction and ultimately the winning bid we then combine these estimates to shed light on whether the reserve prices set by the auctioneer indeed maximize her ex ante expected revenue at a final stage we exploit our rich data to provide new insights that have not previously been documented in the empirical auctions literature such as the impact of reserve prices on i bidder s search behavior and ii the composition and characteristics of bidders this new evidence helps shed light on how to best characterize this environment in terms of whether bidders endogenously enter auctions and whether they hold symmetric valuations or not our analysis has broad relevance in three regards first car sales through auctions form an important share of the market the value of cars sold via auction in the united states was 89 billion in 2007 and used car dealers filled over 30 of their inventory via auctions roberts 2013 second the auction mechanism used in our setting an open ascending second price auction that allows proxy bidding is widely suggested to be the most prevalent online auction format bajari and hortacsu 2004 third the specific auction design feature we study reserve prices is commonly observed in online and offline formats the first set of outcomes we study are motivated by the theoretical auction literature these relate to the impact of reserve prices on winning bids the number of entrants that is the number of bidders that place at least one bid and the probability the object is sold 2 theory suggests reserve price impacts on these margins depend on three factors i whether bidders have private or common valuations of the auctioned object ii whether bidder entry is exogenous or endogenous and iii whether the reserve price signals the auctioneer s private information on the true value of the auctioned object in exogenous entry models predictions about the impact of reserve prices on these outcomes are robust with regard to whether bidders have private affiliated or common values for the object milgrom and weber 1982 myerson 1981 riley and samuelson 1981 and to whether the reserve price conveys a signal of the object s value to buyers cai riley and ye 2007 as is intuitive in this class of exogenous entry models a higher reserve price discourages entry of marginal bidders decreases the likelihood the object is sold and increases winning payments conditional on sale theoretical predictions on reserve price impacts are less clear cut in endogenous entry models levin and smith 1994 tan and yilankaya 2006 analogous to exogenous entry models a higher reserve price discourages entry of both potential and actual bidders and decreases the probability of sale however a higher reserve price might decrease winning payments through its adverse impact on entry

sustainable land use management under biodiversity lag effects the destruction of natural habitats for agricultural production results in local biodiversity loss biodiversity loss in turn affects agricultural production indirectly through a range of biodiversity dependent ecosystem services land conversion thus results in a negative externality mediated by changes in biodiversity when the consequences of this externality are delayed in time lack of internalization results in overshoot and collapse dynamics which are undesirable from a sustainability perspective here we emphasize the importance of forward looking policies for the long term sustainability of human nature interactions we show that the internalization of this externality through a land tax can result in several win win effects in the long run first more biodiversity is preserved at equilibrium which increases the carrying capacity and total well being of the human population second a taxation path that maximizes the discounted sum of human utilities prevents or greatly alleviates overshoot and collapse crises thus increasing the sustainability of the system in particular this result holds in the case of imperfect information regarding the precise temporal dynamics of biodiversity loss suggesting that the design of efficient land use management policies is possible despite incomplete ecological data this study highlights the need to internalize biodiversity dependent externalities through economic incentives especially under uncertainty regarding long term ecological dynamics

behavior in all pay auctions with incomplete information abstract this paper analyzes the behavior of single unit all pay auctions within the independent private values environment in the laboratory we study revenue individual bidding behavior and efficiency in relation to theoretical benchmarks and to a similar study of winner pay first price sealed bid auctions we conclude that the all pay auction yields significantly higher revenue than both the risk neutral bayesian equilibrium and the winner pay auction bidders decisions move closer to equilibrium levels over time in the auction

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association

multi dimensional reference dependent preferences in sealed bid auctions how most laboratory experiments differ from the field abstract we study bidding behavior in first and second price sealed bid auctions with loss averse agents our model predicts overbidding in first price induced value auctions consistent with evidence from most laboratory experiments substantially different bidding behavior could result in commodity auctions where money and auction item are consumed along different dimensions of the consumption space differences also result in second price auctions our study thereby indicates that transferring qualitative behavioral findings from induced value laboratory experiments to the field may be problematic if subjects are loss averse

payoff dominance vs cognitive transparency in decision making i introduction there is a general question about how well laboratory markets work in eliciting true preferences given the low opportunity costs of making errors as in harrison 1989 vernon smith 1982 set out a series of conditions that must be adhered to if a laboratory market investigation is to provide insight into economic behavior in naturally occurring markets the opportunity cost question posed above is covered under smith s payoff dominance and reward saliency precepts for laboratory market experiments if the experimental setting is to elicit true preferences from the subjects the monetary payoffs in the experiment must be salient and dominate potential extraneous influences on subject behavior this paper reports on three series of experiments which employ the becker degroot marshak bdm mechanism to investigate the interaction between payoff dominance reward saliency and cognitive effort in the decision task the bdm mechanism is well suited to this task because it involves only individual choice is theoretically incentive compatible and offers a high degree of experimenter control over payoffs initial information and feedback on the results of decisions becker degroot and marschak 1964 introduced the following preference elicitation mechanism individuals state the most they would be willing to pay wtp 1 for a good then a random price is drawn from a distribution known to the individuals if the stated value is greater than or equal to the random price the individual buys the good at the randomly determined price otherwise the individual does not buy the good the bdm bidding mechanism can be shown to be incentive compatible the intuition is straightforward it is not in the individual s interest to understate true wtp if the random buying price falls between the stated wtp and the true wtp the individual has foregone a beneficial trade it is also not in an individual s interest to overstate true wtp if the random buying price is greater than the true value but less than the stated value the individual will be required to buy the good at a price greater than true wtp a more formal proof is easy to construct 2 let v the true value of one unit of the auction good b the bid submitted to purchase one unit of the good r the price randomly determined to be paid if the good is purchased p r probability that price r is randomly selected y sup o initial income u y utility a function of money income and the value of the good and e initial monetary balance provided in an experiment in the wtp version of the bdm auction the good is purchased if b greater than or equal to r with the subject paying only r and not purchased if b less than r in experiments using the bdm the subject cannot bid more than the experimental balance e so it must be that v less than e if the experiment is to be demand revealing assuming that subjects maximize expected utility they will submit bid b that maximizes eu integral of p r u y sup o e v r dr between limits b and 0 integral of p r u y sup o e dr between limits e and b the first integral describes the expected payoff for random prices r below the bid b and the second integral describes the expected payoff for random prices between the bid b and the maximum possible bid as limited by the balance e the maximum over b occurs when the derivative of eu with respect to b is zero in other words when deu db p b u y e v b u y e 0 so long as p b greater than 0 i e there is some probability the offered bid will be the price the above implies that the maximum occurs when b v in other words it is individually optimal to submit a bid b equal to one s true value v for the commodity although the bdm is incentive compatible in theory it is an empirical question whether it has this property in practice