Abstract
In repeated second-price experimental auctions, the winning bid is normally posted after each round. The posting of these winning prices after each round can result in bids submitted in later rounds to be interdependent with posted prices from earlier rounds. Several approaches in the past have tried to scrutinize their experimental data for value interdependence by regressing bids on lagged market prices or lagged bids and ignoring the inherent endogeneity problem. This paper introduces a formal test for bid interdependence in repeated second-price auctions with posted prices using a dynamic panel model. We then apply this test to formally check the presence of bid interdependence in three datasets used in previous studies.
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Notes
Although our approach can be applied to any institution with a signal of price information.
Although they are from diverse cultural backgrounds, Greece for DLN and USA for CR and LS
It was assumed that subjects are more familiar with candy bars since they have better knowledge of the extralaboratory price of the product while it is the opposite for mugs.
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Acknowledgements
We are grateful to Glenn Harrison, Jay Corrigan and Jayson Lusk for helpful feedback. We also thank Jay Corrigan and Jayson Lusk for providing us the data from their experiments.
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Drichoutis, A.C., Nayga, R.M., Lazaridis, P. et al. A Consistent Econometric Test for Bid Interdependence in Repeated Second-Price Auctions with Posted Prices. Atl Econ J 39, 329–341 (2011). https://doi.org/10.1007/s11293-011-9292-0
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DOI: https://doi.org/10.1007/s11293-011-9292-0