Experimental Auctions: Methods and Applications in Economic and Marketing Research

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  • Format: Paperback
  • Copyright: 2008-01-14
  • Publisher: Cambridge University Press
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Economists, psychologists, and marketers are interested in determining the monetary value people place on non-market goods for a variety of reasons: to carry out cost-benefit analysis, to determine the welfare effects of technological innovation or public policy, to forecast new product success, and to understand individual and consumer behavior. Unfortunately, many currently available techniques for eliciting individuals' values suffer from a serious problem in that they involve asking individuals hypothetical questions about intended behavior. Experimental auctions circumvent this problem because they involve individuals exchanging real money for real goods in an active market. This represents a promising means for eliciting non-market values. Lusk and Shogren provide a comprehensive guide to the theory and practice of experimental auctions. It will be a valuable resource to graduate students, practitioners and researchers concerned with the design and utilization of experimental auctions in applied economic and marketing research.

Author Biography

Jayson L. Lusk is Professor and Willard Sparks Endowed Chair in the Department of Agricultural Economics, Oklahoma State University Jason F. Shogren is Stroock Distinguished Professor of Natural Resource Conservation and Management, and Professor of Economics and Finance, University of Wyoming

Table of Contents

List of figuresp. ix
List of tablesp. x
Introductionp. 1
Introductionp. 1
Why experimental auctions?p. 3
What is an experimental auction?p. 5
Purpose of this book and boundaries of coveragep. 17
Incentive compatible auctions: theory and evidencep. 19
Introductionp. 19
Theory of incentive compatible auctionsp. 20
Evidence from induced value auctionsp. 27
Value theoryp. 34
Introductionp. 34
Valuation under certaintyp. 34
Valuation under uncertaintyp. 37
Valuation in a dynamic environment with uncertainty, limited information, and irreversibilityp. 43
Summaryp. 44
Conducting experimental auctions: some preliminariesp. 46
Introductionp. 46
Experimental designp. 47
Sample size determinationp. 55
Experiment setting and context: field versus laboratoryp. 57
Conclusionsp. 61
Conducting experimental auctionsp. 62
Introductionp. 62
Training and practicep. 62
Endowment versus full biddingp. 65
Choosing an auction mechanismp. 69
Multiple good valuation, demand reduction, and field substitutesp. 76
Learning and affiliation in repeated bidding roundsp. 80
Negative valuesp. 92
Conclusionsp. 94
Data analysisp. 95
Introductionp. 95
Censored regressions with auction bidsp. 95
Quantile regression with auction bidsp. 100
Panel data regression with auction bidsp. 103
Other types of data analysis with auction bidsp. 106
Conclusionsp. 112
Valuation case studiesp. 113
Introductionp. 113
Informing Policy I: beef tenderness grading systemp. 113
Informing Policy II: valuing safer foodp. 121
Informing Policy III: tolerance for genetically modified foodp. 129
Marketing I: forecasting market share of a new productp. 137
Marketing II: preferences for fresh food with multiple quality attributesp. 141
Marketing III: the value of farm financial recordsp. 149
Controversial goods I: demand for genetically modified food in three countriesp. 154
Controversial goods II: irradiationp. 163
Controversial goods III: food from animals treated with growth hormonesp. 169
Concluding commentsp. 174
Appendicesp. 175
Auction design: case studiesp. 196
Introductionp. 196
Preference learningp. 196
Willingness to pay, willingness to accept, and the auction mechanismp. 199
Second price auction tournamentsp. 209
Preferences: fixed or fungible?p. 217
Gift exchangep. 225
Calibration of real and hypothetical auction bidsp. 229
Hybrid auctions and consequential biddingp. 239
Concluding remarksp. 245
Validity of experimental auctionsp. 247
Introductionp. 247
Auction bids and economic theoryp. 248
Reliabilityp. 252
Convergent validityp. 255
Anomaliesp. 261
Summaryp. 267
The future of experimental auctionsp. 269
Introductionp. 269
Ten questions worthy of future researchp. 270
Concluding remarksp. 278
Referencesp. 279
Indexp. 297
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