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

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.