Designing Experimental Auctions for Marketing Research: The Effect of Values, Distributions, and Mechanisms on Incentives for Truthful Bidding

Jayson Lusk, Corinne Alexander and Rousu Matthew C.
Additional contact information
Rousu Matthew C.: Susquehanna University, rousu@susqu.edu

Review of Marketing Science, 2007, vol. 5, issue 1, 32

Abstract: Accurately estimating consumer preferences for new products is an arduous task made difficult by the fact that individuals tend to exhibit a number of biases when answering hypothetical survey questions. Experimental auctions have advantages over conventional methods of estimating consumer preferences because they provide incentives for consumers to truthfully reveal their preferences. However, there is currently little information available to determine which mechanism to select among the class of incentive compatible mechanisms. In this paper, we provide insight into the theoretical properties of several incentive compatible value elicitation mechanisms including the Becker, DeGroot, Marschak (BDM) mechanism, Vickrey nth price auctions, and the random nth price auction. In particular, we draw attention to the shapes of the payoff functions and illustrate that the mechanisms differ with respect to the expected cost of deviating from truthful bidding. We show that incentives for truthful bidding depend on the distribution of competing bidders' values and/or prices and individuals' true values for a good. Our approach can be viewed as a diagnostic tool to aid in selecting between preference elicitation mechanisms.

Keywords: auction; payoff function; preference elicitation; willingness-to-pay (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.2202/1546-5616.1059 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: DESIGNING EXPERIMENTAL AUCTIONS FOR MARKETING RESEARCH: EFFECT OF VALUES, DISTRIBUTIONS, AND MECHANISMS ON INCENTIVES FOR TRUTHFUL BIDDING (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:revmkt:v:5:y:2007:i:1:p:32:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/roms/html

DOI: 10.2202/1546-5616.1059

Access Statistics for this article

Review of Marketing Science is currently edited by Ram C. Rao

More articles in Review of Marketing Science from De Gruyter
Bibliographic data for series maintained by Peter Golla ().