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Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions
Last registered on May 18, 2021

Pre-Trial

Trial Information
General Information
Title
Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions
RCT ID
AEARCTR-0007219
Initial registration date
May 17, 2021
Last updated
May 18, 2021 9:41 AM EDT
Location(s)
Region
Primary Investigator
Affiliation
Johns Hopkins University
Other Primary Investigator(s)
PI Affiliation
Johns Hopkins University
PI Affiliation
University of Delaware
PI Affiliation
California Air Resources Board
Additional Trial Information
Status
Completed
Start date
2014-01-13
End date
2018-10-17
Secondary IDs
Abstract
Experimental research in behavioral economics focuses on consumer behaviors. Similar research on profit-maximizing producers is rare. In three field experiments involving commercial agricultural producers in the US, we test whether anchoring affects producer bids in competitive auctions for conservation cost-share contracts worth thousands of dollars. In conservation cost-share contracts, the costs of implementing an on-farm conservation practice (an impure public good) are shared by the farmer and an external agent (e.g., government or non-profit). In the three field auctions in the study, the value of the starting cost-share bid was randomized to be either 0% or 100%. We estimate the effect of the starting bid price on final bids and whether experience with conservation contracts attenuates the treatment effect.
External Link(s)
Registration Citation
Citation
Ferraro, Paul et al. 2021. "Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions." AEA RCT Registry. May 18. https://doi.org/10.1257/rct.7219-1.0.
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Experimental Details
Interventions
Intervention(s)
In three competitive auctions for conservation cost-share contracts, the value of the starting cost-share bid was randomized to be either 0% or 100% (i.e., the default starting was either "producer pays everything" or "external agent pays everything").
Intervention Start Date
2014-01-13
Intervention End Date
2018-10-17
Primary Outcomes
Primary Outcomes (end points)
We estimate the average effect of the starting-bid anchor on the value of producers’ final bids. We also study whether experience with such auctions has a moderating effect on the magnitude of any anchoring effect.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
We conduct three competitive agri-environmental incentive auctions with US farm producers. The auctions were embedded in conservation programs that were run as cost-share programs, in which the procurer and the bidder shared the total cost of contract implementation; i.e., the bids were expressed as the percent of the total cost that the producer would pay, varying from 0% to 100%. In the auctions, bidders made cost-share offers (bids) for environmental contracts that provide them with cash assistance for implementing technologies or land-use practices that provide private and public benefits (an impure public good). For example, farmers could choose to install in-ground filters (a technology) or vegetative buffer strips (a practice), which retain farm soil (private benefit) and remove fertilizer runoff before it enters and pollutes surface waters (public benefit). The treatment in our experimental study was an anchor in which the starting bid viewed by producers, which was randomly assigned to be 0% for half of the participants and 100% for the other half.
Experimental Design Details
Randomization Method
Computer-generated randomization
Randomization Unit
Individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
None
Sample size: planned number of observations
For the StewardShares I and II auctions, all producers who had a registered nutrient management plan with the state of Delaware were eligible to participate. There was no planned number of observations. For the StewardShares III auction, which had less restrictive eligibility, the planned number of observations was 1200.
Sample size (or number of clusters) by treatment arms
We planned to assign 50% of the sample to the 0% default starting bid price and 50% of the sample to the 100% default starting bid price for each of the three experiments.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Delaware Institutional Review Board
IRB Approval Date
2013-12-23
IRB Approval Number
551990-6
IRB Name
University of Delaware Institutional Review Board
IRB Approval Date
2016-06-22
IRB Approval Number
957205-5
IRB Name
Johns Hopkins University Institutional Review Board
IRB Approval Date
2016-10-27
IRB Approval Number
HIRB00004824
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
October 17, 2018, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
October 17, 2018, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
StewardShares I (N= 121); StewardShares II (N= 57); StewardShares III (N= 482); Pooled (N= 660)
Final Sample Size (or Number of Clusters) by Treatment Arms
StewardShares I (60 Starting Bid 0%, 61 Starting Bid 100%); StewardShares II (28 Starting Bid 0%, 29 Starting Bid 100%); StewardShares III (230 Starting Bid 0%, 252 Starting Bid 100%)
Data Publication
Data Publication
Is public data available?
No

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Program Files
Program Files
Yes
Program Files URL
Reports, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS