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The Effects of Selling Complements and Substitutes on Consumer Willingness to Pay: Evidence from Laboratory Experiments

Matthew Rousu (), Robert Beach () and Jay Corrigan ()

Working Papers from Kenyon College, Department of Economics

Abstract: Basic economic theory predicts that a consumer’s willingness to pay for a good is affected by the availability of complements and substitutes. In an auction setting, this theory implies that the presence of complements would increase bid prices for a good, while the presence of substitutes would decrease bid prices for a good. We designed an experiment that allows the calculation of inverse elasticities, the inverse-demand equivalent of conventional price elasticities. Our results show that the availability of complementary and substitute products affects bids in the expected directions. This finding has important implications for researchers who design experimental auctions.

Keywords: auctions; complements; consumer demand; demand flexibilities; inverse elasticities; laboratory experiments; substitutes. (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
Date: 2008-06
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http://economics.kenyon.edu/corrigan/publications/Demand%20Curve%20Shifts.pdf (application/pdf)

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