Do people always pay less than they say? Testbed laboratory experiments with IV and HG values

Nicolas Jacquemet (), Robert-Vincent Joule (), Stephane Luchini () and Jason Shogren
Additional contact information
Robert-Vincent Joule: LPS - Laboratoire de Psychologie Sociale - AMU - Aix Marseille Université
Stephane Luchini: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies – people generally overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses a two experiments design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both IV and HG values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an induced-value, private good context, and (ii) persists in homegrown values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by "preference formation" rather than "preference elicitation". In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid "zero" to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.

Keywords: Auctions; Demand revelation; Experimental valuation; Hypothetical bias (search for similar items in EconPapers)
Date: 2010-01-02
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00443668v1
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Do People Always Pay Less Than They Say? Testbed Laboratory Experiments with IV and HG Values (2011)
Working Paper: Do people always pay less than they say? Testbed laboratory experiments with IV and HG values (2011)
Working Paper: Do people always pay less than they say? Testbed laboratory experiments with IV and HG values (2011)
Working Paper: Do people always pay less than they say? Testbed laboratory experiments with IV and HG values (2011)
Working Paper: Do people always pay less than they say? Testbed laboratory experiments with IV and HG values (2010)
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