No abstract

We evaluate the impact of three auction mechanisms -the Becker-DeGroot-Marschak mechanism, the second-price auction, and the random nth-price auction -in the measurement of willingness to pay (WTP) and willingness to accept (WTA) measures of value. Our results show that initial bidding in trial 1 in each auction does not contradict the endowment effect; but that, if it is the endowment effect that governs people's initial bidding behavior, it can be eliminated with repetitions of a second-price or random nth-price auction; and if the thesis is that the effect should persist across auctions and across trials is right, our results suggest that there is no fundamental endowment effect.

Theory suggests that the Vickrey auction should accurately measure the " true" value of an auctioned good (Valuei = Bid,). When these values are homegrown, there is concern over individuals not revealing their true preferences in the laboratory, due to changing their bids (strategic bidding). Fears that the Vickrey auction is inadequate in eliciting "true" values have prompted us to test an alternative exchange institution-the random N-th price auction-to improve the measurement of value. Our results suggest that the Vickrey auction is sufficient in eliciting homegrown values.