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Abstract

We illustrate the experimental method by examining bidding behavior for controversial goods, i.e., goods in which bidders have positive and negative values. Our results suggest that bidding behavior differs across auction type. Bidders with positive induced values bid sincerely in a WTP auction. Bidders bid conservatively, however, in the WTA auction, foregoing profitable opportunities. Informing bidders of their optimal strategy serves to attenuate bidding discrepancies but does not eliminate them. Treating the WTP and WTA auctions as equivalent given positive and negative values could lead one to overstate the costs relative to the benefits of the controversial good.

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