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Browsing APEC Research Reports by Subject "Auction experiments"
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Item Auction versus Posted Price in Experiments: Comparisons of Mean and Marginal Effect(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2017-06) Wu, Shang; Fooks, Jacob; Li, Tongzhe; Messer, Kent D.; Delaney, DeborahEconomic experiments have been widely used to elicit individuals’ evaluation for various commodities and non-market goods. Common elicitation methods include auctions and posted price mechanisms. Experimental auctions are theoretically incentive compatible so are assumed to give an unbiased estimate of individuals’ evaluation including willingness to pay (WTP). However, the vast majority of purchasing decisions are not made in auctions but in market settings, such as grocery stores, where consumers make yes/no decisions in response to a set price. In this research, we carefully design an experiment to compare homegrown-value WTP estimates between an auction and a posted price elicitation format. This design enables us to make both within- and between-subjects comparisons of the mean WTP and marginal effect estimates. Results from 115 adult consumers indicate that WTP estimates obtained from an auction are approximately 32% - 39% smaller than WTP estimates obtained from a posted price mechanism. In addition, we compare the statistical significance and conclude that auctions require a smaller sample size than posted price mechanisms in order to detect the same preference change. Nevertheless, the signs of marginal effects for different product characteristics are consistent in both mechanisms.Item Do Auctions Underestimate Consumer WTP? An Artefactual Field Experiment(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2014-05) Wu, Shang; Fooks, Jacob; Messer, Kent D.; Delaney, DeborahAuction experiments are commonly used to elicit consumer values for a wide range of items and services. These auctions are theoretically incentive compatible so are assumed to give an unbiased estimate of consumers’ willingness to pay (WTP). However, the vast majority of consumer decisions are made not in auctions but in posted-price settings, such as grocery stores. This study tests whether the two mechanisms yield similar WTP estimates by comparing WTP for honey from a second-price Vickrey auction and the WTP from a posted-price dichotomous-choice mechanism in a within-subject, homegrown-value setting. Results from 115 adult consumers indicate that estimates of WTP generated by an auction are approximately 50% smaller than WTP estimates generated by a posted-price mechanism. We test several potential explanations for this difference in behavior and find no evidence of anchoring or yea-saying effects. The evidence does suggest that the framing of choice in an auction format and a lack of familiarity with auctions are the most plausible explanation for this downward bias.