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Private Valuation of a Public Good in Three Auction Mechanisms

Dragicevic Arnaud Z. and David Ettinger ()
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Dragicevic Arnaud Z.: Center for Interuniversity Research and Analysis on Organizations (CIRANO)

Journal of Benefit-Cost Analysis, 2011, vol. 2, issue 2, 1-29

Abstract: We evaluate the impact of three auction mechanismsthe Becker-DeGroot-Marschak (BDM) mechanism, the second-price auction (SPA), and the random nth-price auction (NPA)in the measurement of private willingness-to-pay and willingness-to-accept for a pure public good. Our results show that the endowment effect is lower with the BDM mechanism. In this market mechanism, the effect disappears after a few repetitions. Yet, on a logarithmic scale, the random nth-price auction yields the highest speed of convergence towards equality of welfare indices. We also observe that subjects value public goods in reference to their private subjective benefit derived from their public funding.

Date: 2011
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