Willingness to Pay versus Expected Consumption Value in Vickrey Auctions for New Experience Goods

Frode Alfnes

American Journal of Agricultural Economics, 2007, vol. 89, issue 4, 921-931

Abstract: Over the past two decades, Vickrey auctions have been widely used to elicit willingness to pay for new food products. This article shows that in a multiperiod context, it can be optimal for consumers to bid higher than the expected consumption value for a new experience good to obtain information about how the new good fits into their preference set. The degree of uncertainty about the consumption value, the purchasing frequency, and expected future market prices affect both the expected value of the quality information and the subgame perfect bidding strategy in Vickrey auctions for new experience goods. Copyright 2007, Oxford University Press.

Date: 2007
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Working Paper: WILLINGNESS TO PAY VERSUS EXPECTED CONSUMPTION VALUE IN VICKREY AUCTIONS FOR NEW EXPERIENCE GOODS (2006)
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