Negative Values in Vickrey Auctions

Source: American Journal of Agricultural Economics, Vol. 86, No. 1 (Feb., 2004), pp. 222-235Some people assign negative values for new products sold on laboratory auction blocks (i.e., irradiated meat). We explore bidding behavior in two Vickrey auctions when people have positive- and negative-induced values for the good. Aggregate bidding in the second-price auction is precise but biased-highest-value positive bidders tend to overstate benefits, whereas lowest-negative bidders understate losses. In contrast, bidding behavior in the random "n"th-price auction is demand revealing irrespective of induced value, but it is imprecise. Examining on- and off-margin bidding behavior, we cannot conclude that any segments of demand are significantly different than the demand revealing regression line.