Are there gambling effects in incentive-compatible elicitations of reservation prices? An empirical analysis of the BDM-mechanism

Holger Müller and Steffen Voigt ()
Additional contact information
Holger Müller: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Steffen Voigt: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Authors registered in the RePEc Author Service: Holger Mueller

No 100021, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: Pricing research suggests incentive compatible evaluations of separate products in so-called monadic designs when consumers' situation-specific WTP is to be elicited in a monopolistic purchase setting. In our study, the lottery-based BDM-mechanism is applied for measuring subjects' WTP for a fast moving consumer good in binding one-on-one interviews at the point of purchase. In previous studies, the validity of elicited WTP measures is commonly checked within subjects with respect to indicators of face and criterion validity (such as interest in buying, preference ratings, compliance rates). In addition, we observed real purchases of a separate validation sample at the point of purchase, thus checking external validity between subjects. As a result, the BDM-based WTPs reveal a sufficient degree of internal face validity. However, the external validity in terms of a goodness of fit between WTP-based predictions and purchases of the validation sample is significantly reduced. Specifically, we observed a substantial underestimation of shares of non-buyers. Hence, a potential bias is indicated, leading to an overrating of consumers' true WTP in the lottery-based BDM-mechanism in the setting of our survey.

Keywords: Pricing; Willingness to Pay (WTP); BDM-mechanism; Validation (search for similar items in EconPapers)
Pages: 17 pages
Date: 2010-10
New Economics Papers: this item is included in nep-exp and nep-mkt
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.fww.ovgu.de/fww_media/femm/femm_2010/2010_21.pdf First version, 2010 (application/pdf)

Related works:
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:mag:wpaper:100021

Access Statistics for this paper

More papers in FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by Guido Henkel ().