Allowing Options in Experimental Auctions

Abstract

Experimental auctions have become a popular method to examine economic issues, but the large costs associated with conducting experiments are problematic. A method that increased the number of usable responses from economic experiments without increasing costs would increase the reliability of results. We report on a new method that has the potential to increase the number of usable responses from experimental auctions: having consumers place one bid on multiple products and allowing the winning bidder(s) to choose the product they most prefer to purchase. We find evidence that this method increases the number of usable responses and produces reliable bids when the products are substitutes. This “options in auctions” method does not appear to work when the products being sold are complements.