On price data elicitation: A laboratory investigation

There is abundant literature in experimental research on decision making under risk, which compares, and ranks subjects’ preferences on the basis of some elicitation method. The present paper performs a similar analysis in order to compare them. Since pricing data lead in many cases to some anomalies (i.e. status quo bias, endowment effect) we examine three mechanisms to elicit price preferences: willingness-to-pay in a second-price auction, willingness-to-accept in a second-price auction, and certainty equivalent elicited with BDM. A Bayesian interpretation of our results suggests that it is not possible to state ex ante the more appropriate elicitation method for a particular subject: for 1/3 of our sample WTP is preferred, for 1/3 of our sample WTA is preferred, and for the remaining 1/3 BDM is preferred.     

Taiwanese Consumer Valuation of Country of Origin Labeling Using Auction Experiment with Tasting

This study attempts to evaluate the economic benefits of the country of origin labeling (COOL) in Taiwan. A Vickrey second-price sealed-bid auction was conducted to estimate the consumer??s willingness to pay for Taiwan products versus those from China and Vietnam. Our experiment was designed to investigate the impacts of product tasting on bidding behavior. The regression results show that tasting raised bids for Taiwan and China teas, but lowered bids for Vietnam tea. The econometric results show very high premiums for Taiwan products. Taiwanese consumers and food producers stand to benefit greatly with COOL.     

Auctioning or assigning an object: some remarkable VCG mechanisms

We construct a variant of the Vickrey auction of a single object where the surplus is split in exogenously fixed shares between the seller and the buyers, up to a margin of error vanishingly exponentially as the number of buyers grows. When the object is the common property of the participants, we can similarly construct VCG mechanisms with a vanishingly small cash transfer to the residual claimant. For any integer q, 3 ≤ q ≤ n, we find the mechanism guaranteeing to each participant a fair share of the qth highest valuation, while minimizing the worst possible ratio of the cash transfer to the efficient surplus. We perform a parallel analysis when the object is undesirable. We compare the cash lost to the largest spread between individual valuations, and obtain the same trade-offs between fairness and the relative loss of surplus.     

Non-expected utility maximizers behave as if expected utility maximizers: An experimental test

We investigate the behaviors of subjects who either do or do not adhere to the expected utility theory using the Becker–DeGroot–Marschak (BDM) method. We directly examine the validity of the expected utility theory in order to distinguish subjects into two groups: those who adhere to the expected utility theory (expected utility maximizers) and those who do not adhere to it (non-expected utility maximizers), and then execute the BDM experiment in the both groups. We find that the differences in the stated prices between the expected and non-expected utility maximizers are not significant. This result implies practical usefulness for the BDM method.     

INCENTIVES AND BEHAVIOR IN ENGLISH, DUTCH AND SEALED-BID AUCTIONS

The Pareto optimality and price behavior of English and Dutch oral auctions, and First-Price and Second-Price sealedbid auctions are compared under various procedures for assigning valuations among cash motivated bidders. The Vickrey propositions with respect to the mean and variance of prices under the English, Dutch and Second-Price auctions are not falsified by the data. Individual behavior and prices in the First-Price auction deviates considerably from Vickrey's Nash postulate. Behaviorly, the English and Second-Price auctions appear to be isomorphic, but the Dutch and First-Price auctions may not be isomorphic.     

Equity and the Vickrey allocation rule on general preference domains

We consider the problem of allocating multiple units of an indivisible good among a group of agents in which each agent demands at most one unit of the good and money payment or receipt is required. Under general preference domains that may contain non quasi-linear preferences, the Vickrey allocation rule is characterized by axioms for equity and continuity without use of efficiency: namely, the Vickrey rule is the only rule that satisfies strategy-proofness, weak envy-freeness for equals, non-imposition, and continuity of welfare.     

On complexity and lotteries' evaluation – three experimental observations

We present experimental evidence suggesting that human subjects penalize lotteries for complexity. Our results contradict the assumption that human agents follow the discounted expected utility model in multi-period choice with uncertainty. In particular, we show that the buying price offered for an inferior, simple multi-period lottery may sometimes significantly exceed the buying price offered for a better, yet more complicated, alternative, when the lotteries are sold to a group of subjects in a first-price auction. We discuss the possibility to modify the existing models of choice to this “complexity effect”.     

The effect of local livestock population changes on auction market viability—a spatial analysis

This paper examines the relationship between auction market closures over the period 1980–2000 and livestock population changes, as recorded in the agricultural and horticultural census. Auction market locations and census data were collated within a Geographical Information System and changes in livestock populations examined by region and by market catchment. Regionally, auction market closures during the 1980s were significantly associated with concurrent reductions in cattle numbers, with market reductions following loss of cattle in eastern lowland areas. No such association with livestock numbers was found during the 1990s. Within these agricultural regions, individual market closures were not associated with changes in local livestock numbers within their catchments. Thus, the historical evidence suggests that whilst a substantial loss of livestock within a region puts pressure on its network of auction markets, the viability of individual markets within the region is decided by other factors. Such factors include the capital costs of modernising market facilities and meeting new regulatory requirements, the effect of unpaid debt on market cashflow, and the market's ability to diversify into other areas of business. The recent outbreak of foot and mouth disease may lead to further market closures, both directly as a result of livestock culls and indirectly as farmers continue to use alternative marketing channels developed when auction markets were closed during the outbreak.     

DESIGNED TO FAIL: THE MEDICARE AUCTION FOR DURABLE MEDICAL EQUIPMENT

We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high‐cost firms potentially displace low‐cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median‐price auction with the standard clearing‐price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency. (JEL D44, I11, H57)     

THE AUCTION MARKET FOR MODERN PRINTS: CONFIRMATIONS, CONTRADICTIONS, AND NEW PUZZLES

Using a large data set with 80,214 repeat sales, we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1.51% during the period 1977–2004. We address several issues regarding the performance of modern prints as investments: the selection bias arising from the self-interest of auction houses; the impact of an ever-expanding universe of auction houses on investment returns; the "masterpiece" effect, or whether more expensive works of art outperform the market as a whole; and the differences in returns that arise due to random fluctuations in collector tastes. ( JEL Z11, G11, G14)     

A LABORATORY STUDY OF AUCTIONS WITH A BUY PRICE

We present a series of laboratory experiments that examine auctions with buy prices, which are prices that allow a bidder to stop the auction and buy the item immediately. Two types of buy prices are considered, one that is available throughout the auction and one that disappears with an initial bid. Both are evaluated with and without proxy bidding. We find that the use of a buy price increases revenue, early bidding, and auction efficiency. Differences between outcomes in auctions with permanent and temporary buy prices are consistent with the observed choices in auction design made by online auction sites. (JEL C90, D44, C70, L81)     

Individual, household and gender preferences for social transfers

This paper reports the results of a nationally representative survey that explored willingness to pay extra taxes for increased levels of social transfers in Ireland. Respondents differ in their interpretation of willingness-to-pay questions with respect to the relevant income constraint being the individual’s budget or the individual’s household budget, with an important explanatory variable in this interpretation being the level of financial management integration within the household. Respondents are also shown to take intra-household bargaining considerations into account when stating preferences for specific redistributive policies; a significant gender difference emerges for a specific fiscal policy (child benefit) which alters the intra-household entitlement to income.     

ROBUSTNESS OF BIDDER PREFERENCES AMONG AUCTION INSTITUTIONS

In previous work, we found that bidders strongly prefer the ascending to the first‐price sealed‐bid auction on a ceteris paribus basis, but perhaps surprisingly, they are not willing to pay up to an entry price for the ascending auction that would equalize the profits. Risk aversion was proposed as an explanation. In this study, we examine two alternative explanations for the observed behavior: loss aversion and aversion to the dynamic bidding process. We find that neither alternative explanation can account for bidders’ auction choice behavior, leaving risk aversion as the only unfalsified hypothesis. (JEL C91, D44)     

Lottery Rather than Waiting-line Auction

This paper investigates the allocative efficiency of two non-price allocation mechanisms – the lottery (random allocation) and the waiting-line auction (queue system) – for the cases where consumers possess identical time costs (the homogeneous case), and where time costs are correlated with time valuations (the heterogeneous case). We show that the relative efficiency of the two mechanisms depends critically on a scarcity factor (measured by the ratio of the number of objects available for allocation over the number of participants) and on the shape of the distribution of valuations. We show that the lottery dominates the waiting-line auction for a wide range of situations, and that while consumer heterogeneity may improve the relative allocative efficiency of the waiting-line auction, the ranking on relative efficiency is not reversed.     

PRIZE‐BASED MECHANISMS FOR FUND‐RAISING: THEORY AND EXPERIMENTS

We study the optimal design of mechanisms for the private provision of public goods in a setting in which donors compete for a prize of commonly known value. We discuss equilibrium bidding in mechanisms that promote both conditional cooperation and competition (i.e., the lottery and the all‐pay auction with the lowest‐bid payment rule) and rank their fund‐raising performance vis‐à‐vis their standard (pay‐your‐own‐bid) counterparts. The theoretically optimal mechanism in this model is the lowest‐price all‐pay auction—an auction in which the highest bidder wins the prize and all bidders pay the lowest bid. The highest amount for the public good is generated in the unique, symmetric, mixed‐strategy equilibrium of this auction. In the laboratory, the theoretically optimal mechanism generates the highest level of donations with three bidders but not with two bidders. (JEL D44, D64)     

The biological children of foster parents in the foster family

This paper derives from a study of 15 biological children of foster parents, ages 6–12. While foster children have quite properly been the subject of much investigation, practically no research has explored the reactions of the foster parents' own children to the fostering experience. Findings of the study and examples from interviews will be cited which point to the possibility that these children exhibit, among other things, separation anxiety and superego conflicts related to fostering. Certain differences between the reactions of the younger (ages 6–8) and the older (ages 9–12) children will be highlighted.Submitted in partial fulfillment of the requirements for the Doctor of Social Welfare degree at New York University School of Social Work, 1985. The author wishes to thank Dr. George Frank, Emily Shachter and Dr. Irving Steingart for their valuable suggestions.     

RESERVE PRICE VERSUS ENTRY FEE IN STANDARD AUCTIONS

Analysis of standard auction rules when bidders are risk averse is usually carried out under the assumption that the seller is able to set an optimal reserve. The role of entry fees has been generally overlooked in that analysis. We consider bidders with constant absolute risk aversion and show that reserve price is an essential tool in the second price auction while entry fee is essential in the first price auction. Furthermore, setting a reserve price and entry fee combination optimally may change some of the rankings of the standard auctions that hold under optimal reserves. (JEL D44)     

Understanding gender differences in older people's attitudes towards life-prolonging medical technologies

The power of medical technologies to extend the final stages of life has heightened the need to understand what factors influence older people's wish to use such medical technologies. We analyse gender differences in such views, based on audio-recorded interviews with 33 men and 36 women (aged 65–93) in south-east England. Older women were twice as likely as men to oppose using medical technologies to extend life. More older women voiced ‘other-oriented’ reasons for their opposition, particularly not wanting to be a burden on others. Older men's attitudes were primarily ‘self-oriented’, reflecting a concern to stay alive for as long as possible, with fewer expressing concern about consequences for others. Women's greater life course involvement in caring and empathising with the wishes and concerns of others underlay these gender differences. Thus, women were ‘performing gender’ by putting others before themselves, even at this critical juncture in their lives.     

CAPS IN SEQUENTIAL CONTESTS

We study a sequential two‐stage all‐pay auction with two identical prizes. In each stage, the players compete for one prize and each player can win either one or two prizes. The designer may impose a cap on the players' bids in each of the stages. We analyze the equilibrium in this sequential all‐pay auction with bid caps and show that capping the players' bids is profitable for a designer who wishes to maximize the players' expected total bid. (JEL D44, D82, J31, J41)     

Private space, shared space and private housing prices in Hong Kong: An exploratory study

This exploratory study examines the relationship between internal space, shared space and private housing prices. Housing floor area is an ambiguous concept in Hong Kong because it covers a possible exaggeration of the amount of ‘private space’ exclusively enjoyed by the owner and an unidentifiable portion of ‘public space’ shared with other owners within the development. Using hedonic pricing models, this study has found that different distributions between private and shared space command different values from the housing buyers. Shared communal space generally exerts a downward pressure on housing prices. The buyers are willing to pay more for the private space and some desirable forms of communal space. A higher willingness-to-pay for the desirable attributes such as clubhouse indicates that the Hong Kong people are increasingly concerned about the quality of living space in the built environment. This study suggests a need of further research into the exact measurement and the different forms of housing space rather than simply taking the stated floor space figures for granted.