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The veil of experimental currency units in second price auctions

Published online by Cambridge University Press:  01 January 2025

Andreas C. Drichoutis ,
Jayson L. Lusk  and
Rodolfo M. Nayga Jr.
Andreas C. Drichoutis*
Affiliation:
Department of Agricultural Economics & Rural Development, Agricultural University of Athens, Iera Odos 75, 11855 Athens, Greece
Jayson L. Lusk*
Affiliation:
Department of Agricultural Economics, Oklahoma State University, Stillwater, OK 74078, USA
Rodolfo M. Nayga Jr.*
Affiliation:
Division of Agriculture, Department of Agricultural Economics & Agribusiness, University of Arkansas, Fayetteville, AR 72701, USA Korea University, Seoul, South Korea Norwegian Institute of Bioeconomy Research, Ås, Norway
*
e-mail: adrihout@aua.gr
jayson.lusk@okstate.edu
rnayga@uark.edu
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Abstract

Economic experiments often entail subjects making decisions with payoffs in experimental currency units (ECUs). Earnings in ECUs are converted to cash at the end of the experiment. Such a procedural choice seems to be driven more by habit or tradition than by empirical evidence that this is more appropriate to use. We report results of a private, induced value second price auction (SPA) experiment in which we manipulate the exchange rate between ECUs and cash. We find virtually no relationship between a stronger/weaker experimental currency and the ability of theory to predict observed outcomes. The only significant effect relates to the comparison of the cash-only condition to the one-to-one exchange condition. The latter produced greater behavioral deviations from theoretical predictions. However, we find that this effect is largely driven by a handful of subjects. The results suggest that the use of ECUs is not a hindrance for experimental practice, at least not in the context of an induced value SPA.

Keywords

Experimental currency unitsECUTokensVickrey auctionInduced values

JEL classification

C90: General
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 1 , Issue 2 , December 2015 , pp. 182 - 196
Copyright
Copyright © Economic Science Association 2015

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Footnotes

Electronic supplementary material The online version of this article (doi:10.1007/s40881-015-0014-2) contains supplementary material, which is available to authorized users.

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