Summary of the Article The Article How Auctions Work for Wine and Art written by Orley Ashenfelter discusses the particular behavior of English auctions in regards to the movement of wines and arts. The behavior of price in these auction settings at times fail to follow the basic laws of prices…
The people bidding do not know the reserve price. Another rule is that the seller cannot bid on himself to avoid prices going up artificially. This practice is unethical and illegal. “No auction house that values its reputation – and the long run profits its reputation secures – would systematically engage in this practice” (Ashenfelter). The fact that reserve prices are kept secret is considered by many an illogical tactic. This occurs because the most dominant strategy used is to bid up in regards to the true valuation of the object which makes the optimal reserve price identical irrelevant of the reserve price being known or kept a secret. Another variable that must be considered in the English auction system is buy-in rates. Sometimes buy-in rates are high despite the fact that the reserve price is also high. These types of sellers are looking to maximize their profit both in terms of final price and buy-in revenues. Auctions that are able to get a lot of bidders to buy-in generate greater profits than places with few bidders participating in the game. Low turnout of bidders is an undesirable marketplace. When this occurs many sellers prefer to take their items off the market temporarily to protect themselves against collusion from the buyers in an attempt to depress the price. The highest bidding in an auction is only accepted if the bid ends up exceeding the reserve price. ...
Cite this document
(“Experimental economics, summary paper Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.net/other/26227-experimental-economics-summary-paper
(Experimental Economics, Summary Paper Essay Example | Topics and Well Written Essays - 500 Words)
“Experimental Economics, Summary Paper Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.net/other/26227-experimental-economics-summary-paper.
The basic assumption presented in the article is that in the bargaining situation in the Ultimatum Game, the allocators will tend to offer something closer to zero while the recipients will receive something positive offer. Something positive may be uncertain because the article presented some facts that recipients somehow have either rational or irrational reasons (Thaler 202).
The economic point of view specifically states that interest and personal consumption are highly associated, more consumption is preferred than less and current and future consumptions influence behavior (Berg, Dickhaut, & McCabe 122). In line with this assumption, there is a need to challenge existing belief that an individual’s self-interested behavior prevails in the social context of the economic standpoint.
The authors indicated that the game would require a “volunteer” in order to enjoy a stipulated benefit by all participants of the game. Equilibrium properties were used to predict the outcomes of the probabilities of volunteering depending on the size of the group: the Nash predictions that contend that the probability of volunteering decreases as the number of members in a group increases, attributed to a “diffusion of responsibility” (Goeree, et.al, 3); the quantal response equilibrium (QRE) which incorporates the effects of noice factors requiring “choice probabilities to be consistent with beliefs” (ibid, 4); and the inequity aversion that indicates that “a person who volun
The author has tried to analyse the various aspects of experimental economics and the factors that determine the successes or the failures of such experiments. There are some pre-conceived notions when treating humans as subjects to such experiments, that humans are rational while being selfish.
They focus was on Jerusalem, Tokyo, Pittsburg and Ljubljana in Israel, Japan, USA and Yugoslavia, respectively. The researchers state that these locations were picked since they were ideal for the experiment and equilibrium-point predictions were available to use as control experiments in gauging accuracy.
The experiment consisted of 12 experimental sessions. The laboratory design of each experiment question consisted of an auction market with four buyers and sellers. Buyers made money by buying from the sellers and reselling to the experimenter, while sellers made money by buying from the experimenter and reselling to the buyers.
Status Quo Bias involves a bias for the present state and not accepting changes. Loss aversion states that the disadvantage in losing an object is considered greater than the advantage of acquiring an object. The research paper explores the relation