Selection Bias, Demographic Effects and Ability Effects in Common Value Auction Experiments

49 Pages Posted: 5 Feb 2005

See all articles by Marco Casari

Marco Casari

Purdue University - Department of Economics

John C. Ham

National University of Singapore (NUS) - Department of Economics

John H. Kagel

Ohio State University (OSU) - Economics

Date Written: June 2005

Abstract

We find clear demographic and ability effects on bidding in common value auctions: inexperienced women are much more susceptible to the winner's curse than men, controlling for SAT/ACT scores and college major; economics and business majors substantially overbid relative to other majors; and those with superior SAT/ACT scores are much less susceptible to the winner's curse, with the primary effect coming from those with below median scores doing worse, as opposed to those with very high scores doing substantially better, and with composite SAT/ACT score being a more reliable predictor than either math or verbal scores by themselves. There are strong selection effects in bid estimates for both inexperienced and experienced subjects that are not identified using standard econometric techniques but rather through our experimental design effects. Ignoring these selection effects is most misleading for inexperienced bidders, as the unbiased estimates of the bid function indicate much faster learning and adjustment to the winner's curse for individual bidders than do the biased estimates.

Keywords: common value auction experiments, selection effects, econometric methods, gender and ability effects

JEL Classification: C9, D44, C24, J16

Suggested Citation

Casari, Marco and Ham, John C. and Kagel, John H., Selection Bias, Demographic Effects and Ability Effects in Common Value Auction Experiments (June 2005). FRB of New York Staff Report No. 213, June 2005, Available at SSRN: https://ssrn.com/abstract=657581 or http://dx.doi.org/10.2139/ssrn.657581

Marco Casari (Contact Author)

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States
765-494-3598 (Phone)
765-496-1567 (Fax)

John C. Ham

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

John H. Kagel

Ohio State University (OSU) - Economics ( email )

1945 North High Street
Columbus, OH 43210-1172
United States

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