DO AUCTION BIDS BETRAY EXPECTATIONS-BASED REFERENCE DEPENDENT PREFERENCES? A TEST, EXPERIMENTAL EVIDENCE, AND ESTIMATES OF LOSS AVERSION

In this paper, we provide a novel experimental auction design that exploits an exogenous variation in the probability of winning to test for the presence of expectations-based reference dependent preferences. We prove that (i) in this design, (which is a one parameter modification of a Becker-de Groote-Marschak (BDM) auction), a lower probability of winning will cause a loss averse agent to bid lower, for a large range of intrinsic values for the object. Data from an experiment demonstrate the existence of this effect. The effect would be absent if preferences were 'standard', or if the status quo was the reference point. Thus we contribute to the nascent literature that empirically documents the importance of expectations as a source of reference points. (ii) We further prove that the experimental design enables unique identification of participants' value distribution and loss averse than men. Finally, as a contribution to experimental methodology, we prove that the BDM mechanism will underestimate loss averse participants' values, we quantify the underestimation, and we suggest methods to bound this bias.Auctions, Expectations, Loss Aversion, Reference dependence

Competition Clauses in Bilateral Trade Treaties - Analysing the Issues in the Context of India’s Future Negotiating Strategy

There is a recent trend towards trade agreements that include trade related competition provisions. However there are large differences across these trade agreements in terms of how the competition provisions are addressed. In this context, this research report tries to analyze the competition provisions in few selected FTAs and draw lessons for India, which is also following the path of entering into trade agreements. The analysis suggests that cooperation in implementing competition laws is immensely helpful. However, at this moment, India can follow the EU style of agreements with competition provisions such as cooperation, exchange of non-confidential information, technical assistance and consultation.trade, India, Competition Clauses