Advances in Management and Applied Economics

Initial Endowment Effects in Multi-Unit Vickrey Auctions

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  • Abstract

    We report the result of experiments designed to assess the effect of initial endowments on willingness to pay values elicited from multi-unit Vickrey auctions. Comparing bids from an “endow and upgrade” approach with the “full bidding” approach, we find that the direction of the endowment effect generally depends on the number of endowed units of the conventional product that subjects are willing to give up in exchange for units of the upgraded product. The endowment effect is “reverse” when the number of units that participants are willing to give up is lower or equal to the number of remaining endowed units. However, we generally find an endowment effect when the number of units a participant is willing to give up is higher than the number of remaining endowed units.