Revisiting Cash Endowment and House Money Effects in Experimental Auctions 1 2

3

ABSTRACT 4

5

Cash endowments are normally given to participants of experimental auctions, now a popularly 6

used method in eliciting willingness to pay values. This study explores the effect of varying cash 7

endowments on bidding behavior in auction experiments conducted in a developing country. 8

Using second price auctions and random nth price auctions, our results suggest that cash 9

endowment levels can have different effects on bidding behavior under different auction 10

mechanisms. However, in contrast to past studies conducted in developed countries, we 11

generally do not see the presence of positive house money effect in our results. This issue is 12

important methodologically since if behavior varies significantly as cash endowment is varied, 13

then care must be taken when designing auction experiments to elicit willingness to pay values 14

or when comparing it to other experimental results and theoretical predictions. 15

Key Words: Cash Endowments; Bidding Behavior; Cash Endowment Effect; House Money 16

Effect; 2nd Price Auction; Random nth-price Auction 17

INTRODUCTION 18

Experimental auctions are now popularly used in the elicitation of willingness to pay (WTP) 19

values for novel products or attributes. For instance, Lusk and Shogren (2007) identified 113 20

academic publications that used experimental auctions. Of these studies, 73 were published in 21

2000 or later. It is a common practice in experimental auctions to offer participants a certain 22

amount of money (i.e., cash endowment or participation fee) to compensate them for their 23

time.1 However, practitioners as well as skeptics of experimental auctions have been interested 24

in the question of how these economic incentives may influence the patterns of observed 25

responses (Beattie and Loomes 1997). In other words, the provision of cash endowment or 26

participation fee may lead to behavioral discrepancies that may be explained by “mental 27

accounting” theory. According to this theory (Thaler 1980), people can mentally frame assets 28

to belong to current or future income/ wealth. This theory then becomes the basis for the “house 29

money effect” proposed by Thaler and Johnson (1990) which suggests that people who have 30

experienced monetary gain or profit are often willing to take more risk because they do not 31

consider the money to be their own. 32

A number of studies have evaluated the issue of house money effects. For instance, 33

Wilcox (1993) cited the “payoff dominance” problem (Smith 1982) wherein results from 34

experiments involving low incentive levels may not generalize to environments with higher 35

incentive levels. Loureiro et al (2003) likewise contend that willingness-to-pay estimates are 36

sensitive to the initial endowment. Similarly, varying the participation fee has been found to 37

significantly affected bidding behaviors in experimental auctions (Kagel 1995) and this effect 38

differed between English and Vickrey auctions (Rutström 1998). Clark (2002) further suggests 39

that there is some empirical evidence from economics and psychology that start-up money might 40

create a “house money effect”. This implies that people may spend or invest such money less 41

carefully than they would with their own money, even with wealth effects taken into account. 42

In consideration of the aforementioned findings, this study aims to revisit and examine 43

the effect of cash endowment, and consequently the house money effect, on bidding behavior in 44

experimental auctions. In this study, we specifically refer to the difference in bidding behavior 45

1 In this paper, we use the terms participation fee and cash endowment interchangeably. They shall not be confused with the entry cost, or the amount of money one must pay to participate in an auction.

due to the cash endowment as the “cash endowment effect” and the increase in bids with 46

increased cash endowments as the “house money effect”. This issue is important 47

methodologically since if behavior varies significantly as we vary the cash endowment, then care 48

must be taken when designing auction experiments or when comparing them to other 49

experimental results and theoretical predictions. 50

In this study, we examine the effect of cash endowment level on bidding behavior under the 51

second price auction and compare the results with bidding behavior under the random nth - price 52

auction. The study of behavioral properties of auction mechanisms has provided a fertile ground 53

for experimental auction researchers in recent years (Lusk et al 2004; Shogren et al 2001; 54

Shogren et al 2006). We choose the Vickrey auction since it is one of the most often studied 55

auction mechanisms. Its merits are well documented: the auction is weakly demand-revealing in 56

theory, bidders set the market-clearing price, and the allocation and cost rules are easy to explain 57

to bidders (Shogren et al 2006). For comparison, we also run our experiments using random nth 58

- price auction. In the random nth - price auction, competitors simultaneously submit sealed bids 59

for a good. Then one bid (the nth bid) is randomly drawn from the sample of competitors. 60

Individuals with bids greater than the nth bid win the auction and purchase one unit of the good 61

at a price equal to the nth bid. 62

Bids from the 2nd price and random nth price auctions should be theoretically equivalent 63

(Lusk 2003), and this result was indeed what Shogren et al (1994) have found empirically. 64

However, Lusk et al (2004) found that bids in 2nd price auction are significantly higher than 65

random nth price auction. Shogren et al (2001) also found that 2nd price auction tends to work 66

better for on-margin bidders whereas the random nth price auction works better for off-margin 67

bidders. Hence, considering these findings, it is conceivable that we should also expect 68

differences in our results. We also conceptually expect differences in results due to the nature of 69

the determination of the number of winners in each type of auction mechanism. Specifically, in 70

the 2nd price auction, there is only one winner and this is exogenously known by subjects before 71

the auction while in the random nth price auction, the possibly multiple number of winners is not 72

known ahead of time and is endogenously determined after the auctions. Hence, we chose to 73

examine these two auction mechanisms since we suspect that this difference in the way winners 74

are determined can potentially influence the way subjects think about their cash endowment and 75

the house money effect. This was indeed what we found in our experiments. 76

Past studies that have generally found the existence of house money effects were 77

conducted in developed countries (i.e., US and Europe). Another objective of our study is to test 78

if this finding can also be observed using subjects from a developing country (i.e., Philippines). 79

No other known study has evaluated this issue in a developing country. We suspect that subjects 80

in developing countries would behave differently in regards to house money effects due to snake-81

bite or loss aversion effects (Thaler and Johnson 1990). We found differing cash endowment 82

effects between our 2nd price and random nth price auctions but did not find a positive house 83

money effect in either of these auctions. 84

The rest of paper is organized as follows. Section 2 provides some literature on cash 85

endowment and its effect on bidding behavior. Section 3 describes the experimental design 86

while Section 4 provides the experimental results. Lastly, Section 5 contains the concluding 87

remarks. 88

CASH ENDOWMENT AND BIDDING BEHAVIOR 89

Rutström (1998) studied the behavioral properties of several auctions (English, Vickrey and 90

Becker, DeGroot and Marshak (BDM)) designed to elicit individual valuations for an object 91

using controlled laboratory experiments. One of the three treatment variables she studied was the 92

initial participation fee ($0, $2 or $10). She found that the difference between English and 93

Vickrey auctions was not stable across participation fee treatments. This suggests that bids 94

might be affected by the amount of the participation fee, and that this effect might differ across 95

auction formats. 96

Loureiro et al (2003) found that participants in a randomly binding second-price auction 97

who received $4 or $6 as initial endowment, bid higher and statistically different bids than those 98

who received only $2. They concluded that endowments that are closer to the value of the 99

auctioned good may be a more appropriate way to compensate auction participants in order to 100

reveal their true willingness to pay for a private good, and to reduce overbidding. They added 101

that their findings illustrate that an initial compensation closer to the participants' value of time 102

may inflate their bids, and consequently may not be a correct compensation mechanism to elicit 103

true willingness-to-pay for private goods. 104

Nalley et al (2005) argued that although Loureiro et al (2003) did find impact of 105

endowment heterogeneity, they made no attempt to control for windfall effects (i.e., the 106

endowment may create a ‘house money’ effect where participants treat the endowment as a 107

windfall which then causes them to not behave rationally) which may have had an impact on 108

their results. Nalley et al (2005) combined the windfall mitigating strategy of Cherry et al 109

(2002; 2003) with the concept of endowment heterogeneity used by Loureiro et al (2003) to 110

examine whether the impact of endowment heterogeneity holds after controlling for potential 111

windfall effects. Their results showed that the mitigation of house money and the windfall 112

income effect will negate the impact of heterogeneity in initial endowments in bidder behavior; 113

that is bids will not be a function of the amount of the initial endowment if the participants were 114

made to ‘earn’ their endowments. 115

The “house money” effect was further explored by Ackert et al (2006). They compared 116

market outcomes across sessions using Vickrey auction that differed in the level of cash 117

endowment (i.e., $60 and $75). The endowments considered the opportunity cost of a student’s 118

time (i.e., the prevailing student assistant fee) to ensure that the endowment was valued and 119

viewed as significant “found money” by the participants. Their experimental results provide 120

support to a “house money” effect where participants bid higher prices when they have more 121

money. 122

Finally, a related study by Jacquemet et al (2009) examined and compared bidding 123

behavior under windfall wealth (i.e., a show-up fee of 10 € each) and earned wealth using a 124

Vickrey auction. They found that earned wealth with monetary incentives induced more sincere 125

bidding and greater efficiency relative to the classic windfall wealth treatment. 126

While the effect of cash endowment on bidding behavior has been evaluated in auction 127

experiments as discussed above, there is scant literature on this issue with respect to 2nd price and 128

random nth price auctions used in elicitation of WTP values for food products. In addition to 129

difference in determination of auction winners, we also focus on these two auction mechanisms 130

since they are now among the most popular experimental auction mechanisms used in elicitation 131

of WTP values for novel food products and attributes. We also revisit this issue using subjects 132

from a developing country to test robustness of the results of previous studies which have been 133

done in developed countries (i.e., US or in Europe). We suspect that subjects in developing 134

countries would behave differently in regards to house money effects due to snake-bite or loss 135

aversion effects (Thaler and Johnson 1990) which we discuss more fully later in the paper. No 136

other known study has evaluated the issue of house money effects in homegrown value 137

experimental auctions in a developing country. 138

EXPERIMENTAL DESIGN 139

The study employed a 2 x 2 between-sample research design. Two incentive compatible auction 140

mechanisms, namely the Vickrey 2nd price and the random nth price auctions, were utilized.2 141

Under either mechanism, two sessions were conducted with different cash endowments offered 142

to the participants. Subjects in the low cash endowment treatments were provided 75 Philippine 143

pesos (PHP)3 while those in the high cash endowment treatments were provided 150 PHP. All 144

subjects were specifically instructed to treat their cash endowment as part of their own wealth. 145

The experiments were conducted in January 2009. All the participants were students at 146

the University of the Philippines Los Baños.4 A total of 137 participants were randomly 147

assigned into the following four sessions: Session One: Vickrey 2nd price with low cash 148

endowment; Session Two: Vickrey 2nd price with high cash endowment; Session Three: random 149

nth price with high cash endowment; and Session Four: random nth price with low cash 150

endowment. 151

All subjects were provided extensive information and training to get them fully 152

familiarized with the auction mechanism and to demonstrate to them that their best strategy is to 153

bid their true values for the product. Specifically, a candy bar auction was first conducted before 154

each formal auction to orient the participants on the auction mechanism assigned to the session. 155

2 In the random nth price auction, bidders simultaneously submit sealed bids for a good. Individuals with bids greater than a randomly drawn nth bid win the auction and purchase one unit of the good at the price equal to the nth bid. See Shogren et al (2001) for details. 3 At the time when these auctions were conducted, $1 = 47PHP. 4 While the use of students may limit the applicability of our results, Depositario et al (2009), using auction data from the Philippines, found that there is no difference in bidding behavior between students and non-students in experimental auctions.

A taste test was also done before the formal auction to familiarize the participants with the 156

product. 157

The product used in the study is carabeef (i.e., buffalo meat) hotdog which is a relatively 158

novel food product in the Philippines. Envelopes containing the subjects’ cash endowments 159

were then distributed. Participants were told that they could use the amounts given them to bid a 160

monetary value representing their true valuation for the product. 161

The Vickrey 2nd price auction had the following five steps: 162

Step 1: Subjects were shown a 250 gram pack of carabeef hotdog and were told that its 163

field counterpart (i.e., regular hotdog) can usually be purchased at local stores for about 50 PHP 164

per ¼ kilogram (i.e., reference price). 165

Step 2: Subjects were asked to indicate the amount they were willing to pay for the 166

carabeef hotdog by writing their ID numbers and bids on the enclosed bid sheets. 167

Step 3: Four additional rounds were conducted. After each round, the monitor ranked 168

the bids, determined the second highest bid, and then posted the second highest bid price as well 169

as the highest bidder’s number in front of the room for market feedback. 170

Step 4: At the completion of the fifth round, a number between one and five was drawn 171

at random to determine the binding round. Once the binding round was determined, the highest 172

bidder for the round was declared the final winner and had to pay the binding bid (i.e., 2nd 173

highest bid) for the pack of 250 gram carabeef hotdog. 174

Step 5: All the participants were then asked to answer a questionnaire containing 175

demographic, consumption and carabeef awareness - related questions. 176

Similarly, the random nth - price auction had the following five steps: 177

Steps 1- 2: Same as Step 1-2 in Vickrey 2nd price auctions. 178

Step 3: Four additional rounds were conducted. After each round, the monitor ranked 179

the bids and then determined the total number of ranks and used a random number generator to 180

determine the random nth bid. The random nth rank and the corresponding bid were posted in 181

front of the room and all bids above the nth bid were declared winning bids for the round. 182

Step 4: At the completion of the fifth round, a number between one and five was drawn 183

at random to determine the binding round. Once the binding round was determined, all winning 184

bidders in the round were declared as the auction winners and were asked to pay the binding bid 185

(nth price) for a pack of 250 gram carabeef hotdog. 186

Step 5: Same as Step 5 in Vickrey 2nd price auctions. 187

AUCTION RESULTS AND REGRESSION ANALYSIS 188

Table 1 shows a summary of the socioeconomic characteristics of the participants in the 2nd price 189

auctions and the random nth - price auctions for both the low and high participation fee sessions. 190

The demographic profiles in terms of gender and age are relatively similar across the four 191

groups. In both auction mechanisms, majority of the participants are female and are mostly able 192

to prepare meals at their current residence. The participants also regularly consumed processed 193

beef products (at least on a weekly basis) and a large majority considers carabeef to be safe for 194

human consumption. 195

[Table 1 near here] 196

The top two panels of Table 2 summarize the participants’ bidding behaviors as the 197

second price auctions progressed across the five rounds. Results suggest that the bids submitted 198

for the auction with high cash endowment tended to be more dispersed as compared to the bids 199

in the low cash endowment treatment, as reflected by larger ranges and variances in the bids. 200

Also, the average bids are higher in the high cash endowment session. Interestingly, the average 201

bid in the low cash endowment session actually surpassed the value of the cash endowment 202

towards the end of the auction rounds. 203

For the sake of comparison and to explore the effect of cash endowment under an 204

alternative auction format, we also conducted random nth price auctions. Two observations are 205

noteworthy. First, unlike the 2nd price auction, there are no clear patterns across five rounds of 206

auctions. Second and more interestingly, the overall bids in the high cash endowment auction 207

are lower than those in the low cash endowment auction. 208

[Table 2 near here] 209

Next we used a simple regression model to investigate the effects of cash endowment on 210

the bids with and without control variables. We use a random effect estimator to control for 211

(unobserved) individual-specific effects across five rounds of auctions5. The results are reported 212

in Table 3. In the 2nd price auction model without the other control variables, the coefficient of 213

the dummy variable for higher cash endowment is statistically significant at the 0.05 level and 214

indicates that subjects in the higher cash endowment group bid 23.54 pesos more than those in 215

the lower cash endowment group. However, this effect disappears with the additional control 216

variables in the model. Specifically, results indicate that after controlling for the effects of some 217

observable factors, the coefficient for the cash endowment dummy decreases in both magnitude 218

and statistical significance: the coefficient is reduced to 8.12 (compared to 23.54 in the previous 219

regression) and ceases to be statistically significant. Hence, contrary to the findings of Loureiro 220

et al. (2003) which also used the 2nd price auction, our results generally suggest that the level of 221

cash endowment do not affect WTP values in 2nd price auctions once observable characteristics 222

are controlled for. 223

5  We did not use a random effects tobit model since we generally did not get zero bids in our auctions.

We conducted the same regression analysis on the random nth price auction data. The 224

results are also presented in Table 3. Results suggest that in both regressions with and without 225

the control variables, higher cash endowment is associated with lower bids. Specifically, our 226

estimates indicate that subjects given higher cash endowments bid roughly about 16 to 17 pesos 227

less than those given lower cash endowments in our random nth price auctions. 228

[Table 3 near here] 229

We also conducted an additional regression analysis with variables capturing the 230

interaction between higher cash endowment and the round variables to assess whether high cash 231

endowment can cause a greater increase in bids across rounds under the two auction mechanisms 232

(see Table 4). In both auction mechanisms, the interactions between fee and round effect are not 233

statistically significant indicating that high cash endowment does not lead to faster increase in 234

bids across rounds. Note, however, that despite the addition of these interaction terms, the cash 235

endowment effects are still absent in the 2nd price auction and negative in random nth price 236

auction, consistent with previous results. 237

[Table 4 near here] 238

DISCUSSION AND CONCLUDING REMARKS 239

Experimental auctions are now among the most popular methods used in eliciting WTP values 240

for novel products or attributes. The objective of this paper is to investigate the effect of cash 241

endowment on bidding behavior in experimental auctions involving food products. This issue is 242

important since most, if not all, auction experiments pay subjects a fee as an incentive for 243

participation in experiments. If bidding behavior in auction experiments is not influenced by the 244

level of cash endowment, then researchers would be free to decide what cash endowment to offer 245

subjects based on their budget and other factors. However, if the level of cash endowment 246

influences bidding behavior in different auction mechanisms, then it would be more difficult for 247

researchers to decide the appropriate amount of incentive to provide participants without 248

worrying about its potential effect on bidding behavior and the robustness of their findings. 249

So what do we learn from our experiments? We can conclude that cash endowment 250

effects can vary depending on the auction mechanism used. In our experiments, in contrast to 251

previous studies (e.g., Loureiro et al 2003), we found that after controlling for observable 252

characteristics, cash endowment effects are not significant in 2nd price auctions. Moreover, in 253

contrast to the positive cash endowment effect (i.e., signifying the presence of house money 254

effects) found in previous studies, we found an unexpected negative cash endowment effect in 255

random nth price auction. Ackert et al (2006) also found in their study using nth price auction 256

that subjects will not necessarily pay more to acquire the good after an increase in wealth. The 257

reason for this finding is not clear and is counter to the notion of the “house money effects” 258

found in previous studies. With house money effect, subjects’ risk aversion is expected to 259

decrease with additional cash endowment since the additional gains can cushion subsequent 260

losses. Consequently, bids are then expected to be higher, not lower, with bigger amounts of 261

found money. It is possible that the nature of the random nth price auction, where the number of 262

winners is endogenously determined (i.e., not known until after the bidding), may have 263

contributed to this puzzling result. For example, subjects with higher cash endowments may 264

have decided that bidding lower values would not automatically exclude them from winning 265

since the number of winners will be determined endogenously after the auction. Subjects may 266

have mentally incorporated the endowment into their own wealth and consequently did not 267

consider their endowment as “other people’s money”. Hence, in this case, the provision of larger 268

cash endowment did not increase risk taking. 269

Another possible explanation for the difference between our results and those of previous 270

studies is that while past research conducted their experiments in developed countries (i.e., US 271

and in Europe), our subjects are from a developing country with lower average income. It is 272

more than likely that our subjects were more “careful” about spending their endowment and 273

considered this as their own money given current income levels and explicit experimental 274

instructions to treat the cash endowment as part of their own wealth. Hence, a snake-bite effect 275

or loss aversion effect might have played a role (Thaler and Johnson 1990). In experimental 276

auctions, bidders might perceive, correctly or mistakenly, a small amount of cash endowment as 277

a windfall income intended to be spent in the experiment. However, when the cash endowment 278

surpasses a certain threshold level, such that the amount can be treated as ‘real income’, the 279

subjects might become more risk averse and stringent with this income. Consequently, we might 280

observe the seemingly counterintuitive results of bids declining with higher cash endowment. In 281

our experiments, subjects in the high cash endowment sessions were given a cash endowment of 282

150PHP. Considering that the average daily wage rate in the Philippines is around 250PHP 283

(National Wages and Productivity Commission - Department of Labor and Employment, 2010), 284

subjects may have considered the endowment amount high enough to induce a pain of a loss 285

(i.e., snake-bite). 286

Obviously, more research is warranted to sort out possible explanations for our findings 287

and to test their robustness. One thing is worth mentioning however. Researchers using 288

experimental auctions to elicit WTP values for novel food products or attributes should be 289

cognizant of the cash endowment effect issue and perhaps should consider varying the level of 290

cash endowment and/or auction mechanism when conducting experimental auctions. By doing 291

this, they can then test the robustness of their findings using not only different levels of cash 292

endowments but also different types of auction mechanisms. This strategy can however be 293

expensive. If resources are more limited, an easier way to possibly control for cash endowment 294

effects is to give random amount of money to each subject. For example, everyone could receive 295

a random draw determining their individual-specific extra fee, which will then be added to their 296

fixed cash endowment or participation fee. Future studies should test if this method would 297

induce more sincere bidding than provision of one constant fee among subjects in experimental 298

auctions. 299

Cash endowments are normally given during or right after the experiment. Given that 300

participants who are paid at the time of the experiments may consider this reward as “free 301

money” (i.e., not part of their wealth), future studies should investigate the effect of “pre-302

payment” and “delayed payment” vis-à-vis payment at the time of the auction. For example, 303

would payment several days before or after the auction lower house money effects and induce 304

more sincere bidding? How about the use of non-cash (i.e., gift cards) versus cash as 305

participation fee? Answers to these questions could further enhance our knowledge of how best 306

to pay subjects participating in experimental auctions. 307

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Table 1. Summary Statistics for Socioeconomic Data

2nd Price Random nth – Price

Variable Category Low (N=34)

High (N=27)

Low (N=37)

High (N=39)

Mean Age 19.29 18.63 18.89 18.87

Gender Male 35% 41% 32% 33%

Female 65% 59% 68% 67%

Able to cook meals at current residence (Cookmeal)

Yes 50% 70% 46% 62%

No 50% 30% 54%

38%

Monthly Allowance < 999 0% 4% 0% 0%

1,000 – 1,999 12% 19% 14% 10%

2,000 – 2,999 9% 4% 8% 8%

3,000 – 3,999 15% 4% 8% 3%

4,000 – 4,999 26% 15% 19% 21%

5,000 – 5,999 12% 19% 16% 21%

6,000 – 6,999 6% 11% 11% 15%

7,000 – 7,999 6% 0% 3% 3%

8,000 – 8,999 3% 4% 11% 3%

9,000 – 9,999 6% 4% 3% 0%

10,000 – 10,999 0% 11% 0% 8%

> 11,000 6% 7% 8% 10%

Frequency of hotdog consumption (Frequency)

Never 3% 0% 0% 0%

Everyday 0% 0% 3% 0%

Three times a week 29% 19% 22% 26%

Once a week 47% 48% 51% 51%

Once a month 21% 26% 24% 23%

Awareness regarding Carabeef a (Awareness)

Aware 44% 56% 68% 41%

Not aware 56% 44% 32% 59%

Perception regarding safety of Carabeef (Safe)

Safe 76% 93% 76% 74%

Unsafe 9% 4% 8% 8%

a  Responses collected regarding Carabeef awareness and safety perceptions were done according to perceived levels (e.g. well-informed, extremely well-informed, agree, strongly agree). A simplified summary was arrived at by categorizing all responses as belonging to either “aware” or “not aware” for the level of information and “safe” or “unsafe” regarding respondent perception.

Table 2. Per Round Summary of Bids Under the Two Auction Mechanisms

Auction/Fee Level Mean Median Variance

2n d Price Auction, Low Cash Endowment (n=34)

Round 1 50.84 46.25 421.52

Round 2 61.62 54.25 627.06

Round 3 71.53 60.12 1050.62

Round 4 78.19 70.00 1486.65

Round 5 85.14 75.00 1847.38

2nd Price Auction, High Cash Endowment (n = 27)

Round 1 64.20 50.00 1581.87

Round 2 83.36 56.00 3274.61

Round 3 98.76 75.65 3924.37

Round 4 107.60 80.00 4745.49

Round 5 111.10 70.00 5694.24

Random nth - Price Auction, Low Cash Endowment (n=37)

Round 1 51.57 40.00 6035.19

Round 2 44.67 45.00 332.21

Round 3 46.44 45.00 413.83

Round 4 45.30 46.00 359.10

Round 5 42.91 40.00 373.89

Random nth - Price Auction, High Cash Endowment (n=39)

Round 1 34.08 34.25 388.78

Round 2 30.42 28.00 402.50

Round 3 27.08 20.50 529.18

Round 4 26.56 23.25 516.71

Round 5 26.40 20.00 553.73

Table 3. Random Effects Regression Results for the Two Auction Mechanisms 2nd Price Auction Random nth - Price Auction

Variablesb w/o Control

Variables With Control

Variablesw/o Control

VariablesWith Control

VariablesCoef. t-value Coef. t-value Coef. t-value Coef. t-value

Intercept 69.46 9.46*** 215.19 3.55*** 46.18 13.63*** 73.22 1.95*

Higher Cash Endowment

23.54

2.13**

8.12

0.75

-17.27

-3.65***

-16.40

-3.35***

Round 2 14.49 3.31*** -5.24 -1.24

Round 3 26.83 6.12*** -6.09 -1.44

Round 4 34.47 7.87*** -6.91 -1.63

Round 5 39.86 9.10*** -8.16 -1.93*

Age -7.26 -2.59** -1.42 -0.75

Gender -16.38 -1.63 -2.51 -0.46

Cookmeal -27.38 -2.39** -2.79 -0.51

Allowance 0.002 0.87 -0.001 -1.30

Frequency -20.12 -1.74* 0.54 0.09

Awareness -11.96 -1.10 2.56 0.49

Safe

R2 -

0.356

13.15

0.445

0.89

0.722

14.62

0.736

2.63**

* Statistically significant at the 0.10 level. ** Statistically significant at the 0.05 level. *** Statistically significant at the 0.01 level.

b The age variable is the actual age of the participant while allowance pertains to the mid-points of income intervals to which the participant’s allowance belongs. The round variables, gender, cookmeal, awareness and safety are all dummy variables. Gender is 1 if male; cookmeal is 1 if able to cook meals at current residence; awareness is 1 if aware of carabeef; and safety is 1 if carabeef is perceived safe.  

Table 4. Random Effects Regression Results for the Two Auction Mechanisms with Higher Cash Endowments and Round Interactions

Variablesc 2nd Price Auction Random nth Price Auction Coefficient T-value Coefficient T-value

Intercept 219.70 3.62*** 73.33 1.94*

Higher Cash Endowment -2.07 -0.17 -16.62 -2.28**

Round 2

10.78

1.84*

-6.90

-1.13

Round 3 20.69 3.52*** -5.12 -0.84

Round 4 27.35 4.66*** -6.26 -1.03

Round 5 34.30 5.84*** -8.65 -1.42

Age -7.26 -2.59** -1.42 -0.75

Gender -16.38 -1.63 -2.51 -0.46

Cookmeal -27.38 -2.39** -2.79 -0.51

Allowance 0.002 0.87 -0.001 -1.30

Frequency -20.12 -1.74* 0.54 0.09

Awareness -11.96 -1.10 2.56 0.49

Safe 13.15 0.89 14.62 2.63**

Higher Cash Endowment ∗ Round 2

8.38 0.95 3.24 0.38

Higher Cash Endowment ∗ Round 3

13.87 1.57 -1.88 -0.22

Higher Cash Endowment ∗ Round 4

16.09 1.82* -1.25 -0.15

Higher Cash Endowment ∗ Round 5

12.58 1.42 0.97 0.11

R2 - .445 .895 *Statistically significant at the 0.10 level. ** Statistically significant at the 0.05 level. *** Statistically significant at the 0.01 level. c The variable “Higher Cash Endowment ∗ Round t”, t – 2,…5, indicates the dummy variable for the interaction between high cash endowment and auction rounds. Round one is left out as the baseline case.