The Effect of Initial Endowments in Experimental Auctions |
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| Authors: | Jay R. Corrigan Matthew C. Rousu |
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| Affiliation: | Jay R. Corrigan is assistant professor, Department of Economics, Kenyon College, and was a visiting collaborator at the Center for Agricultural and Rural Development while conducting part of this research. Matthew C. Rousu is assistant professor, Department of Economics, Susquehanna University. |
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| Abstract: | We report the results of an experiment designed to test whether initial endowments affect value estimates elicited from experimental auctions. Comparing bids for one unit of a good, two units of a good, and a second unit of a good when endowed with the first unit, we find that willingness to pay for the second unit of a good is, on average, as much as 75% higher when endowed with the first unit. We go on to advance two theories that could potentially reconcile our results with neoclassical consumer theory. |
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| Keywords: | endowment effect experimental auctions reciprocity top-dog effect |
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