Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions

Ferraro, Paul J.; Messer, Kent D.; Shukla, Pallavi; Weigel, Collin

doi:10.1162/rest_a_01215

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June 23 2022

Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions

Paul J. Ferraro,

Paul J. Ferraro

Carey Business School and the Department of Environmental Health and Engineering, a joint department of the Bloomberg School of Public Health and the Whiting School of Engineering, Johns Hopkins University, Baltimore, MD 21211 pferraro@jhu.edu

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Kent D. Messer,

Kent D. Messer

Department of Applied Economics and Statistics, University of Delaware, Newark, DE 19716 messer@udel.edu

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Pallavi Shukla,

Pallavi Shukla

Department of Environmental Health and Engineering, a joint department of the Bloomberg School of Public Health and the Whiting School of Engineering, Johns Hopkins University, Baltimore, MD 21211 pshukla4@jhu.edu

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Collin Weigel

California Air Resources Board, Sacramento, CA 95814 collin.weigel@arb.ca.gov

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Author and Article Information

Paul J. Ferraro

Carey Business School and the Department of Environmental Health and Engineering, a joint department of the Bloomberg School of Public Health and the Whiting School of Engineering, Johns Hopkins University, Baltimore, MD 21211 pferraro@jhu.edu

Kent D. Messer

Department of Applied Economics and Statistics, University of Delaware, Newark, DE 19716 messer@udel.edu

Pallavi Shukla

Department of Environmental Health and Engineering, a joint department of the Bloomberg School of Public Health and the Whiting School of Engineering, Johns Hopkins University, Baltimore, MD 21211 pshukla4@jhu.edu

Collin Weigel

California Air Resources Board, Sacramento, CA 95814 collin.weigel@arb.ca.gov

For funding support, the authors thank the United States Department of Agriculture National Institute of Food and Agriculture (2019-67023-29854; 2017-67024-26278), Economic Research Service (59-6000-4-0064; 58-6000-1-0037), and the Office of the Chief Economist (58-0111-18-003). For implementation and research assistance, the authors thank Mark Masters and Linda Means from the University of Albany; Kristin Rowles from Policy Works; J. Dustin Tracy from Augusta University; Sean Ellis, Michael Griner, Nicholas Janusch, Kaitlynn Ritchie, Olesya Savchenko, and Madeline Valinksi from the University of Delaware; Marisa Henry, Ben Meiselman, Panayiota Petrou-Zeniou, and Katie Tam from Johns Hopkins University.

Online ISSN: 1530-9142

Print ISSN: 0034-6535

2022

The President and Fellows of Harvard College and the Massachusetts Institute of Technology

The Review of Economics and Statistics 1–40.

https://doi.org/10.1162/rest_a_01215

Abstract

Experimental research in behavioral economics focuses on consumer behaviors. Similar experimental research on profit-maximizing producers is rare. In three field experiments involving commercial agricultural producers in the US, we detect evidence of anchoring in competitive auctions for conservation contracts related to nutrient and pest management that were worth, on average, nearly nine thousand dollars. In these auctions, the value of the starting cost-share bid was randomized to be either 0% or 100%. When the starting value was 100%, final bids were 46% higher, on average. We find weak evidence that experience with conservation contracts may modestly attenuate the anchoring effect.

Randomized Controlled Trial, Behavioral Anomalies, Defaults, Producers, Choice Architecture, Replication

D91

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2022

The President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Behavioral Biases among Producers: Experimental Evidence of Anchoring in Procurement Auctions

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