Revealing consumers' willingness-to-pay: A comparison of the BDM mechanism and the Vickrey auction

By Charles N. Noussair, Stéphane Robin, B. Ruffieux. 2004

273 citations recorded by the source corpus.

Abstract We compare the capability of the Becker–DeGroot–Marschak (BDM) mechanism and the Vickrey auction to reveal willingness-to-pay information for a sample of French consumers. We measure the bias and dispersion of bids relative to valuations. We find that the Vickrey auction, for the particular training procedure we employ, is more effective as a willingness-to-pay elicitation device than the BDM process. We conjecture that differences in the shape of the payoff function account for some of the differences.

Subfields: Economics and Econometrics, Management Science and Operations Research, Marketing

View Paper: https://www.semanticscholar.org/paper/951919bf6e68c6c2f36d20a59bdb4c8e4161b75d

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Jacinto Braga
2. Andrés Silva
3. Marc Willinger
4. C. Starmer
5. John L. Park
6. Martin Schreier
7. Nikolaus Franke
8. A. Stenger

In Management Science and Operations Research

1. Martin Schreier
2. C. Starmer
3. Nikolaus Franke
4. R. Nayga

In Marketing

1. Nikolaus Franke
2. Martin Schreier
3. Andrés Silva
4. C. Starmer
5. John L. Park
6. A. Stenger
7. Jacinto Braga
8. Benjamin L. Campbell

Citations in the corpus

• Willingness-to-pay for food safety: an experimental investigation of quality certification on bidding behaviour (2004, background): “In a controlled experiment involving a representative sample of the general population, Noussair et al. (2003b) found that the BDM procedure involves larger biases, greater dispersion and slower convergence towards the dominant strategy bid, than the second price auction.”
• Revisiting Cheap Talk with New Evidence from a Field Experiment (2011, background): “Hence, a bidder who submits a bid greater than the market price receives the good and pays an amount equal to the market price (Noussair, Robin, and Ruffieux, 2004).”
• Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana (2020, unknown): “In addition, several studies explicitly compare BDM with other incentive-compatible elicitation mechanisms and find differences in elicited WTP (Rutstram 1998; Shogren et al. 2001; Noussair et al. 2004).”
• Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis (2005, result): “This idea is supported by Noussair et al. (2004).”
• Product uniqueness as a driver of customer utility in mass customization (2008, background): “These nonhypothetical, incentive-compatible methods of measuring consumers’ WTP have been found to produce highly valid results (Noussair et al. 2004) and are superior to hypothetical, non-incentive-compatible alternatives (e.”
• A REVIEW OF METHODS FOR MEASURING WILLINGNESS-TO-PAY (2017, unknown): “With respect to these results Noussair et al. (2004) conclude that Vickrey auctions are superior to the BDM procedure for elicitation of WTP towards private goods.”