TY  - JOUR
AU  - Harrison,Glenn W.
AU  - List,John A.
TI  - Naturally Occurring Markets and Exogenous Laboratory Experiments: A Case Study of the Winner's Curse
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13072
PY  - 2007
Y2  - April 2007
UR  - http://www.nber.org/papers/w13072
L1  - http://www.nber.org/papers/w13072.pdf
N1  - Author contact info:
Glenn W. Harrison
Georgia State University
E-Mail: gharrison@gsu.edu

John List
Department of Economics
University of Chicago
1126 East 59th
Chicago, IL 60637
Tel: 301/405-1288
Fax: 301/314-9091
E-Mail: jlist@uchicago.edu
AB  - There has been a dramatic increase in the use of experimental methods in the past two decades. An oft-cited reason for this rise in popularity is that experimental methods provide the necessary control to estimate treatment effects in isolation of other confounding factors. We examine the relevance of experimental findings from laboratory settings that abstract from the field context of the task that theory purports to explain. Using common value auction theory as our guide, we identify naturally occurring settings in which one can test the theory. In our treatments the subjects are not picked at random, as in lab experiments with student subjects, but are deliberately identified by their trading roles in the natural field setting. We find that experienced agents bidding in familiar roles do not fall prey to the winner's curse. Yet, when experienced agents are observed bidding in an unfamiliar role, we find that they frequently fall prey to the winner's curse. We conclude that the theory predicts field behavior well when one is able to identify naturally occurring field counterparts to the key theoretical conditions.
ER  -