Discerning Efficiency Shortfalls Without Knowing Valuations

Laboratory experiments employing an induced-values methodology often report on allocative efficiencies observed. That methodology requires experimenters know subjects' motivations, questionable in laboratory experiments, impossible in field experiments. Allocative efficiency implies a hypothetical costless aftermarket would be inactive. An allocation mechanism's outcome is herein defined to be behaviorally efficient if an appropriate aftermarket is actually appended to the mechanism and at most a negligible size of remaining mutually beneficial gains identified. Methodological requirements for behavioral efficiency observation are provided. A first demonstration observes significantly greater behavioral inefficiencies in secondthan in first-price auctions. A simple field demonstration indicates when a public good increase can be observed to cover marginal cost to subjects' mutual benefit, without knowing valuations. Several empirical issues that arise are briefly discussed. A wide variety of empirical economic policy studies can utilize this methodology to observe comparative evidence of alternative policies' allocative efficiency shortfalls.