Inducing risk-neutral preferences: Further analysis of the data

James C. Cox, Ronald L. Oaxaca

Research output: Contribution to journalArticlepeer-review

15 Scopus citations


The lottery payoff procedure does not successfully induce risk-neutral bidding behavior in first-price, sealedbid auctions. This conclusion follows from both ordinary-least-squares estimation with natural data and leastabsolute-deviation estimation with transformed data from numerous experimental designs. Lottery payoffs do not succeed in inducing behavior predicted from standard expected utility theory assumptions or from assumed utility from winning and/or income thresholds. In contrast, first-price auction experiments with monetary payoffs yield results that are consistent with general models of bidding in the independent private values information environment.

Original languageEnglish (US)
Pages (from-to)65-79
Number of pages15
JournalJournal of Risk and Uncertainty
Issue number1
StatePublished - Jul 1995


  • auctions
  • experimental economics
  • lottery payoffs

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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