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In this article, we report the results of an experiment designed to address the effect of risk attitudes on valuations of aged wines. We find that higher risk taking in the economic domain is associated with a significantly higher willingness to pay for an old wine. Given the increasing interest of consumers and investors in old wines, our results are applicable to the pricing of old wines and to the use of auctions as an efficient willingness to pay elicitation mechanism. (JEL Classifications: C91, D44, L66)
In the framework of a critical illustration of the contemporary history of economics, this chapter considers applied economics, econometrics, input–output analysis, descriptive statistics and statistical indicators, the theory of market regulation, market creation and auctions, the variegated history of energy economics from the Hotelling theorem to trilateral oligopoly and the Malthusian Club of Rome thesis of resource scarcity, the different approaches to environmental economics.
The antiquities catalogues of major auction houses comprise an accessible long-term source of information about the auction market in antiquities and the market in antiquities more generally. The information contained in these catalogues has been used to investigate the nature and scale of the market and to assess the impact of legal and normative measures of market control. But, by way of two case studies, referencing Iraqi and Cambodian material sold at the New York branch of Sotheby’s, this article argues that, while auction catalogues do provide an invaluable source of information for investigating the antiquities market, it can be misleading. Changing material or monetary statistics might reflect commercial factors unrelated to market control. For more reliable research, long-term auction data should be contextualized with information available from other sources.
Aberrant sensitivity to social reward may be an important contributor to abnormal social behavior that is a core feature of schizophrenia. The neuropeptide oxytocin impacts the salience of social information across species, but its effect on social reward in schizophrenia is unknown.
We used a competitive economic game and computational modeling to examine behavioral dynamics and oxytocin effects on sensitivity to social reward among 39 men with schizophrenia and 54 matched healthy controls. In a randomized, double-blind study, participants received one dose of oxytocin (40 IU) or placebo and completed a 35-trial Auction Game that quantifies preferences for monetary v. social reward. We analyzed bidding behavior using multilevel linear mixed models and reinforcement learning models.
Bidding was motivated by preferences for both monetary and social reward in both groups, but bidding dynamics differed: patients initially overbid less compared to controls, and across trials, controls decreased their bids while patients did not. Oxytocin administration was associated with sustained overbidding across trials, particularly in patients. This drug effect was driven by a stronger preference for winning the auction, regardless of monetary consequences. Learning rate and response variability did not differ between groups or drug condition, suggesting that differences in bidding derive primarily from differences in the subjective value of social rewards.
Our findings suggest that schizophrenia is associated with diminished motivation for social reward that may be increased by oxytocin administration.
Companies that manage mandatory pension funds are frequently accused of excessive fee taking. International analyses have found that in countries with legal caps, commissions remain within these caps; hence, market competition does not function. Surprisingly, there are few international cases where local regulators implement mechanisms to facilitate competition. The variety of auction mechanisms available raises the question of whether an optimal solution exists for this purpose. Therefore, in this study, we present evidence, based on a controlled regulatory experiment, on the fee-reduction potential of reverse auctions.
Les enchères all-pay constituent des mécanismes de vente dans lesquels le vendeur retient les offres de tous les participants. Nous étudions une classe d’enchères all-pay ou l’acquéreur paie une combinaison convexe entre son offre et la deuxième meilleure offre. Une condition suffisante pour l’existence d’un équilibre symétrique est proposée. Nous montrons sous quelles conditions le vendeur peut extraire tout le surplus des participants.
Un groupe d'agents décide de mettre à sa disposition un site collectif polluant. Pour ce faire, ils font appel à une entreprise chargée de la localisation et de la construction de l'installation. Celle-ci leur propose une procédure de localisation/tarification soumise à l'approbation de tous les agents. Dans un tel contexte, l'entreprise est forcée à internaliser les dommages subis par les agents dans sa fonction de coût: ce phénomène rappelle l'achat de droit à polluer. En information incomplète, les mécanismes incitatifs optimaux indiquent l'existence d'inefficacités dues à l'attribution d'une rente informationnelle à chaque agent: la localisation échoue alors qu'elle aurait profité à tout le monde. Dans deux applications (externalités diffuses et ex-ternalités locales) du modèle général, l'enchère optimale est complètement caractérisée.
Cet article compare les différentes méthodes utilisées pour mesurer les tendances de prix dans les enchères séquentielles, en s'appuyant sur la théorie des indices. Des données sur les enchères de vin sont utilisées pour montrer que différentes méthodes appliquées aux mêmes données peuvent conduire à des conclusions significativement différentes. De plus, la même méthode peut conduire à des résultats opposés en fonction du critère de sélection des paires des biens similaires vendus successivement. Enfin, le nombre d'objets identiques vendus influence la tendance des prix.
This paper investigates reversals in wine auction prices following a series of strong positive and negative returns. Using the Chicago Wine Company's auction data, we find evidence of reversals after extreme wine price changes. There is a clear asymmetry in the market reaction to wine price increases and declines. Wine price declines after strong price increases are not, in general, as significant as wine price increases after strong price declines. The strongest reversal occurs for wines that have declined in price by more than 30 percent. (JEL Classifications: D44, G14)
Despite public health efforts, folate deficiency is still largely prevalent in poor, rural populations and continues to cause a large burden of disease. The present paper determines and compares consumer preferences for two folate strategies: folic acid supplementation v. folate biofortification, i.e. the enhancement of the folate content in staple crops.
Experimental auctions with non-repeated information rounds are applied to rice in order to obtain willingness-to-pay for folate products. Thereby, GM or non-GM folate-biofortified rice (FBR) is auctioned together with rice that is supplemented with free folic acid pills (FAR).
Shanxi Province (China) as a high-risk region of folate deficiency.
One hundred and twenty-six women of childbearing age, divided into a school (n 60) and market sample (n 66).
Despite differences according to the targeted sample, a general preference for folate biofortification is observed, regardless of the applied breeding technology. Premiums vary between 33·9 % (GM FBR), 36·5 % (non-GM FBR) and 19·0 % (FAR). Zero bidding behaviour as well as the product choice question, respectively, support and validate these findings. The targeted sample, the timing of the auction, the intention to consume GM food and the responsibility for rice purchases are considered key determinants of product choice. A novel ex-post negative valuation procedure shows low consistency in zero bidding.
While the low attractiveness of FAR provides an additional argument for the limited effectiveness of past folic acid supplementation programmes, the positive reactions towards GM FBR further support its potential as a possible complementary micronutrient intervention.
Information about cigarettes can help smokers come to an informed decision about what cigarettes to purchase. Countermarketing information can help smokers make informed decisions, but little is known about the value of this information to smokers. In this article, we use data from experimental auctions to estimate the value of countermarketing information that counters industry claims about reduced-risk cigarettes. We find that this information has significant value to smokers who have been exposed to marketing information from tobacco companies touting reduced-risk cigarettes, but we find no evidence it provides value to smokers not exposed to this marketing information.
The current rapid decline in biodiversity in human-dominated agricultural landscapes, both in Europe and worldwide, impacts on the provision of environmental services essential to human well-being. There is, therefore, a pressing need to develop and implement incentive-based conservation policies to counteract the ongoing loss of biodiversity. This paper presents results of a regionally-scaled conservation procurement auction, a type of incentive-based payments for environmental services (PES), targeted at the conservation of arable plant diversity. By matching arable fields that were participating in the PES scheme to control fields that were not enrolled in the PES scheme, two critical key characteristics were addressed, namely additionality and bid prices. Additionality was addressed by evaluating whether fields for which PES were issued had significantly higher arable plant diversity than the matched control fields. The cost-effectiveness of a conservation auction increases if payments compensate just farmers’ opportunity costs (in terms of forgone production); bid prices of participating farmers were thus also evaluated to determine whether they were related to their individual opportunity costs. The PES scheme proved to be highly effective in ensuring environmental services delivery through enhanced arable plant diversity on participating fields. In contrast, the potential of the proposed conservation auction design to raise cost-effectiveness has to be questioned, because bid prices submitted in this scheme substantially exceeded individual farmers’ opportunity costs. Therefore, bid prices were most likely influenced by socioeconomic factors other than opportunity costs. This case study illustrates potentials and pitfalls associated with the implementation of a PES scheme and, by evaluating the effectiveness of the scheme, contributes to an improved understanding of incentive-based mechanisms for both policymakers and practitioners involved in PES scheme design and implementation.
Inspired by the theoretically oriented dynamic analysis of moving average rules in the model of Chiarella, He, and Hommes (CHH) [Journal of Economic Dynamics and Control 30 (2006), 1729—1753], this paper conducts a dynamic analysis of a more realistic microstructure model of continuous double auctions in which the probability of heterogeneous agents trading is determined by the rules of either fundamentalists mean-reverting to the fundamental or chartists choosing moving average rules based on their relative performance. With such a realistic market microstructure, the model is able not only to obtain the results of the CHH model but also to characterize most of the stylized facts including volatility clustering, insignificant autocorrelations (ACs) of returns, and significant slowly decaying ACs of the absolute returns. The results seem to suggest that a comprehensive explanation of several statistical properties of returns is possible in a framework where both behavioral traits and realistic microstructure have a role.
Conservation programs faced with limited budgets often use a competitive enrollment mechanism. Goals of enrollment might include minimizing program expenditures, encouraging broad participation, and inducing adoption of enhanced environmental practices. We use experimental methods to evaluate an auction mechanism that incorporates bid maximums and quality adjustments. We examine this mechanism's performance characteristics when opportunity costs are heterogeneous across potential participants, and when costs are only approximately known by the purchaser. We find that overly stringent maximums can increase overall expenditures, and that when quality of offers is important, substantial increases in offer maximums can yield a better quality-adjusted result.
The laboratory provides a test bed to inform many design choices for emissions permit markets. Experiments are sometimes strongly motivated and structured by specific theoretical models and predictions, but in other cases the experiment itself can be the model of the market and regulatory environment. We review specific experimental applications that address design issues for permit auction rules, permit expiration dates and banking, liability rules, and regulatory enforcement.
The appearance of organic produce is often less than perfect because of limited methods of avoiding plant diseases. We combine hypothetical and real auction mechanisms to investigate how cosmetic damage affects Consumers' willingness to pay for apples. We find that 75% of the participants are willing to pay more for organic than for conventional apples given identical appearance. However, at the first sight of any imperfection in the appearance of the organic apples, this segment is significantly reduced. Furthermore, the cosmetic damage has a larger impact on the willingness to pay for organic apples than for conventional apples.
After controlling a variety of feeder cattle characteristics and market and sale conditions in Iowa feeder auctions, the price premiums for preconditioning claims (vaccinations and minimum 30 days of weaning) with and without third-party certification (TPC) are estimated as $6.12/cwt and $3.35/cwt, respectively. These premiums differ statistically (p < 0.0001), and their difference exceeds the average participation cost of TPC ($l/cwt). This indicates that TPC is valued in the market to credibly signal preconditioning investment under asymmetric information.
The Progressive Second Price mechanism (PSP), recently introduced by
Lazar and Semret to share an
infinitely-divisible resource among users through pricing, has been shown to verify
very interesting properties.
Indeed, the incentive compatibility
property of that scheme, and the convergence to
an efficient resource allocation where established, using the framework
of Game Theory.
Therefore, that auction-based allocation and pricing scheme seems
particularly well-suited to solve congestion problems in
telecommunication networks, where the resource to share is the
available bandwidth on a link.
This paper aims at
supplementing the existing results by highlighting some properties of the
different equilibria that can be reached.
We precisely characterize the possible outcomes of the
PSP auction game in terms of players bid price:
when the bid fee (cost of a bid update) tends to zero then the bid price of all users at equilibrium gets close to the so-called market clearing price of the resource. Therefore, observing an equilibrium of the PSP auction game gives some accurate information about the market clearing price of the resource.
Environmental and consumer groups have called for mandatory labeling of genetically engineered (GE) food products in the United States, stating that consumers have the “right to know.” Herein, we use a nonhypothetical field experiment to examine the willingness to pay for GE-labeled products, using the only second-generation GE product currently on the U.S. market—GE cigarettes. Our results suggest consumers pay less for GE-labeled cigarettes when marketing information is absent. But, when presented with marketing information on the attributes of the cigarette, we find no evidence that consumers pay less for GE-labeled cigarettes.