simultaneously submit sealed bids for a good. The individual with the lowest bid wins the
auction and pays the second highest bid price (Lusk, Feldkamp, and Schroeder 2004). The
second-price auction provides the incentive for study participants to truly reveal their preferences
as the auction separates individual valuations from market price. The market price (the 2nd
highest bid) is separate from one’s individual bid; consequently, there is no gain in strategic
bidding. Shogren et al. (1994) state, “bidding less than one’s true value reduces the chance of
winning at would have been a profitable price, while bidding more than one’s true value
increases the chance of winning but at a price that exceeds one’s value” (p. 1098). However,
some evidence suggests that subjects “over-bid” in second-price auctions compared to other
auction-mechanisms (Kagel and Levin 1993; Lusk, Feldkamp, and Schroeder 2004).
Data and Methods
Because this research is interested in valuing a good, e.g., farm records, which is owned by the
study participants in question, a 2nd price willingness-to-accept (WTA) auction was conducted.
That is, we sought to measure the minimum amount of money that must be paid to a farmer such
that they would be willing to permanently give up their financial records. Several preliminary
focus groups and pre-tests were conducted to determine an individual’s reaction to the auction
mechanism and to determine how to characterize records which could vary greatly in terms of
quantity and quality. It was learned that a non-trivial number of individuals were unwilling to
bid to give up their records. This led us to modify the auction format such that individuals could
simply check a box on their bid-sheet indicating they did not want to participate in the auction.
Participants in the primary portion of the study came from two main sources. First, 35
people were recruited from a “Top Farmer Crop Workshop” held at Purdue University; the
audience was a group of competitive, commercial producers. Participation in the experiment
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