The impact of dealâ€ proneness on WTP estimates in incentiveâ€ aligned value elicitation methods
Jing Xie and
Zhifeng Gao ()
Agricultural Economics, 2018, vol. 49, issue 3, 353-362
Even after controlling for hypothetical biases, some incentiveâ€ aligned value elicitation methods still produce different willingnessâ€ toâ€ pay (WTP) estimates. In this study, we compare WTP estimates from three incentiveâ€ aligned value elicitation methods: real choice experiment (RCE), real doubleâ€ bounded dichotomous contingent valuation (RCVM), and Beckerâ€“DeGrootâ€“Marschak auction (BDM). We find that participantsâ€™ aggressiveness in obtaining low prices (i.e., â€œdealâ€ pronenessâ€ ) influences WTP estimates in the BDM auction, but not those elicited from the RCE and RCVM. The participants with higher levels of dealâ€ proneness tend to submit lower bids in the BDM auction. The discrepancies in WTP estimates between different incentiveâ€ aligned procedures are narrower for participants with lower levels of dealâ€ proneness. Our results indicate that the bids in BDM auctions may be understated and the auction mechanism may induce the â€œgambling behaviorâ€ of people who are dealâ€ prone. That is, whether the BDM auction is truly incentiveâ€ aligned is again called into question. We also discuss the practical implications for food retailers.
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