Title

Is the Experimental Auction a Dynamic Model?

Document Type

Article

Publication Date

5-2005

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.

Journal

Environmental and Resource Economics

Volume

31

Issue

1

First Page

35

Last Page

45