Bidding rules that guarantee procedural fairness may induce more equilibrium bidding and moderate other-regarding concerns. Here, we investigate procedural fairness in the sense of Gueth 2011. In our experiment, we assume commonly known true values and only two bidders to implement a best-case scenario for other-regarding concerns. The two-by-two factorial design varies ownership of the single indivisible commodity (an outside seller versus collective ownership) and the price rule (first versus second price). Our results indicate more equilibrium behavior under the procedurally fairer price rule, although this does not completely crowd out other-regarding concerns. In addition, the limits of procedural fairness turn out to be much more important than expected.
Does procedural fairness crowd out other-regarding concerns? A bidding experiment
Levati, Maria Vittoria;
2013-01-01
Abstract
Bidding rules that guarantee procedural fairness may induce more equilibrium bidding and moderate other-regarding concerns. Here, we investigate procedural fairness in the sense of Gueth 2011. In our experiment, we assume commonly known true values and only two bidders to implement a best-case scenario for other-regarding concerns. The two-by-two factorial design varies ownership of the single indivisible commodity (an outside seller versus collective ownership) and the price rule (first versus second price). Our results indicate more equilibrium behavior under the procedurally fairer price rule, although this does not completely crowd out other-regarding concerns. In addition, the limits of procedural fairness turn out to be much more important than expected.
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