Randomization, endogeneity and laboratory experiments

The role of cash balances in private value auctions

John Ham, John H. Kagel, Steven F. Lehrer

    Research output: Contribution to journalArticle

    Abstract

    From a theoretical perspective, cash balances are thought to play a role in common value auctions because of limited liability. However, they have also been found to be important in common value auctions where limited liability is not an issue. This paper investigates whether this effect carries over to private value auctions, since limited liability issues do not arise in private value auctions. We address the issue that cash balances are likely to be endogenous. We show that additional randomization can be used to reduce endogeneity problems and to improve the performance of our estimators. Further, we find that standard panel data econometric techniques are very useful in the analysis of data from laboratory experiments. Finally, we find that the cash balance effect does indeed carry over from common value auctions to private value auctions.

    Original languageEnglish (US)
    Pages (from-to)175-205
    Number of pages31
    JournalJournal of Econometrics
    Volume125
    Issue number1-2 SPEC. ISS.
    DOIs
    StatePublished - Mar 1 2005

    Fingerprint

    Endogeneity
    Auctions
    Randomisation
    Experiment
    Carry-over Effects
    Panel Data
    Econometrics
    Randomization
    Cash
    Laboratory experiments
    Common-value auctions
    Limited liability
    Private values
    Likely
    Estimator

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance
    • Statistics and Probability

    Cite this

    Randomization, endogeneity and laboratory experiments : The role of cash balances in private value auctions. / Ham, John; Kagel, John H.; Lehrer, Steven F.

    In: Journal of Econometrics, Vol. 125, No. 1-2 SPEC. ISS., 01.03.2005, p. 175-205.

    Research output: Contribution to journalArticle

    Ham, John ; Kagel, John H. ; Lehrer, Steven F. / Randomization, endogeneity and laboratory experiments : The role of cash balances in private value auctions. In: Journal of Econometrics. 2005 ; Vol. 125, No. 1-2 SPEC. ISS. pp. 175-205.
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