Naturally Occurring Markets and Exogenous Laboratory Experiments: A Case Study of the Winner's Curse

Authors: Harrison, Glenn W.¹; List, John A.²

Source: The Economic Journal, Volume 118, Number 528, April 2008 , pp. 822-843(22)

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Abstract:

We examine the relevance of experimental findings from laboratory settings that abstract from the field context of the task that theory purports to explain. Using common value auction theory as our guide, we identify naturally occurring settings in which one can test the theory. Experienced agents bidding in familiar roles do not fall prey to the winner's curse. Yet, experienced agents fall prey to the winner's curse when bidding in an unfamiliar role. We conclude that the theory predicts field behaviour well when one is able to identify naturally occurring field counterparts to the key theoretical conditions.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-0297.2008.02144.x

Affiliations: 1: University of Central Florida 2: NBER and University of Chicago

Publication date: 2008-04-01