Experimental Auction Procedure: Impact on Valuation of Quality Differentiated Goods

Abstract

Despite increased use of experimental auctions, a myriad of different procedures are being employed without formal consideration of how the procedures might affect results. This study investigates the effect of several procedural issues on valuation estimates from experimental auctions. Results indicate the second price auction generates higher valuations than English, Becker—DeGroot—Marschak (BDM), and random nth price auctions, especially in latter bidding rounds, and that random nth price auction yields lower valuations than English and BDM auctions. We find that endowing subjects with a good prior to eliciting bids can have an impact on valuations, but the effect varies across auction mechanism.

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