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The Effect of Initial Endowments in Experimental Auctions
Author(s) -
Corrigan Jay R.,
Rousu Matthew C.
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00870.x
Subject(s) - common value auction , unit (ring theory) , economics , value (mathematics) , willingness to pay , affect (linguistics) , microeconomics , econometrics , mathematics , statistics , psychology , mathematics education , communication
We report the results of an experiment designed to test whether initial endowments affect value estimates elicited from experimental auctions. Comparing bids for one unit of a good, two units of a good, and a second unit of a good when endowed with the first unit, we find that willingness to pay for the second unit of a good is, on average, as much as 75% higher when endowed with the first unit. We go on to advance two theories that could potentially reconcile our results with neoclassical consumer theory.