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Naturally Occurring Markets and Exogenous Laboratory Experiments: A Case Study of the Winner's Curse
- Publication Year :
- 2007
-
Abstract
- There has been a dramatic increase in the use of experimental methods in the past two decades. An oft-cited reason for this rise in popularity is that experimental methods provide the necessary control to estimate treatment effects in isolation of other confounding factors. We examine the relevance of experimental findings from laboratory settings that abstract from the field context of the task that theory purports to explain. Using common value auction theory as our guide, we identify naturally occurring settings in which one can test the theory. In our treatments the subjects are not picked at random, as in lab experiments with student subjects, but are deliberately identified by their trading roles in the natural field setting. We find that experienced agents bidding in familiar roles do not fall prey to the winner's curse. Yet, when experienced agents are observed bidding in an unfamiliar role, we find that they frequently fall prey to the winner's curse. We conclude that the theory predicts field behavior well when one is able to identify naturally occurring field counterparts to the key theoretical conditions.
- Subjects :
- Economics and Econometrics
Curse
jel:C93
jel:C90
jel:C91
Field (Bourdieu)
05 social sciences
jel:D44
Context (language use)
Bidding
jel:D02
jel:L0
Microeconomics
Winner's curse
0502 economics and business
Econometrics
Economics
Relevance (law)
Common value auction
050207 economics
050205 econometrics
Subjects
Details
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....8fe6dc13edafe7f290d5b063b8c9f1a0