Abstract
Experimental auctions are generally thought of as static markets. This paper presents the results of an experimental auction designed to test whether participants’ perceptions regarding the relative difficulty of delaying or reversing a transaction outside the experimental market systematically affect their willingness-to-pay bids. The results show that auction participants’ perceptions significantly impact their bids in a manner that is consistent with real option theory. These results suggest that economists must be careful to consider the existence of outside markets when designing experimental auctions.
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JEL classifications: C91, D44, D81
The author was a visiting collaborator at the Center for Agricultural and Rural Development in Ames, Iowa, while part of this research was completed.
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Corrigan, J.R. Is the Experimental Auction a Dynamic Market?. Environ Resource Econ 31, 35–45 (2005). https://doi.org/10.1007/s10640-004-6981-z
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DOI: https://doi.org/10.1007/s10640-004-6981-z