The veil of experimental currency units in second price auctions

Andreas Drichoutis, Jayson Lusk and Rodolfo Nayga

Journal of the Economic Science Association, 2015, vol. 1, issue 2, No 6, 182-196

Abstract: 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 units; ECU; Tokens; Vickrey auction; Induced values (search for similar items in EconPapers)
JEL-codes: C90 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (21)

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DOI: 10.1007/s40881-015-0014-2

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