Abstract
This analysis employs a uniform 4th price sealed-bid auction to test the impact of endowment heterogeneity on participant bids. A mechanism to legitimize the wealth of participants consistent with prior research on endowments is employed. Second, unlike some previous literature, a mechanism to endogenously induce endowment heterogeneity is employed. Results from a Tobit analysis of participant bids indicate that endowment heterogeneity has no significant impact on bidding behaviour. Therefore, it is concluded that when wealth is legitimized within an experiment, bidding behaviour is more likely rational leading to more robust experimental results.
Acknowledgements
The authors thank Keith Coble and Jayson Lusk for comments on this experiment and paper. This research was supported by the United States Department of Agriculture, Agricultural Research Service through a cooperative agreement.
Notes
GMAT questions available from authors upon request.
Experimental survey available from authors upon request.
Nutritional handout available from authors upon request.