The initial endowment effect in experimental auctions revisited: further evidence

Authors: Lanier Nalley¹; Darren Hudson¹; Gregory Parkhurst¹

Source: Applied Economics Letters, Volume 12, Number 1, January 15, 2005 , pp. 59-63(5)

Publisher: Routledge, part of the Taylor & Francis Group

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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.

Document Type: Research article

DOI: 10.1080/1350485042000307080

Affiliations: 1: Department of Agricultural Economics Mississippi State University Box 5187 Mississippi State MS 39762 USA

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