Abstract
Using two auction mechanisms, the second price auction and the Becker, DeGroot, and Marschak mechanism, we examined individuals' buying and selling bidding patterns in three types of binary lotteries: a lottery offering only real products, a lottery offering only monetary outcomes and mixed lotteries offering both real products and monetary value outcomes. Participants' willingness to pay and willingness to accept for the product lottery suggest risk neutrality. In contrast, participants' bidding prices for the monetary and mixed lotteries suggest risk aversion. These findings suggest that an individual's risk attitude depends upon the type of lottery, perhaps indicating a "product illusion".
| Original language | English |
|---|---|
| Pages (from-to) | 253-261 |
| Number of pages | 9 |
| Journal | International Journal of Economic Theory |
| Volume | 6 |
| Issue number | 2 |
| DOIs | |
| State | Published - 6 Oct 2010 |
| Externally published | Yes |
Keywords
- Becker
- DeGroot
- Experiment
- Lotteries
- Marschak mechanism
- Product illusion
- Risk attitude
- Second price auction
- Uncertainty
- Willingness to accept
- Willingness to pay
ASJC Scopus subject areas
- Economics and Econometrics