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Game form misconceptions are not necessary for a willingness-to-pay vs. willingness-to-accept gap


Bartling, Björn; Engl, Florian; Weber, Roberto A (2015). Game form misconceptions are not necessary for a willingness-to-pay vs. willingness-to-accept gap. Journal of the Economic Science Association, 1(1):72-85.

Abstract

Cason and Plott (J Polit Econ, 122(6):1235–1270, 2014) show that subjects’ misconception about the incentive properties of the Becker-DeGroot-Marschak (BDM) value elicitation procedure can generate data patterns that look like—and might thus be misinterpreted as evidence for—preferences constructed from endowments or reference points. We test whether game form misconceptions are necessary to produce willingness-to-pay (WTP) vs. willingness-to-accept (WTA) gaps in a valuation experiment in which subjects are randomly assigned to the role of either buyer or seller. We employ a design that allows us to identify whether a subject understood the incentive properties of a price-list version of the BDM mechanism. We find a robust WTP-WTA gap, even among subjects whose elicited valuations for a good of induced and known monetary value and whose ability to identify the payoffs resulting from their choices indicate an understanding of the incentive properties of the BDM mechanism. We conclude that game form misconceptions are not a necessary condition for the emergence of WTP-WTA gaps.

Cason and Plott (J Polit Econ, 122(6):1235–1270, 2014) show that subjects’ misconception about the incentive properties of the Becker-DeGroot-Marschak (BDM) value elicitation procedure can generate data patterns that look like—and might thus be misinterpreted as evidence for—preferences constructed from endowments or reference points. We test whether game form misconceptions are necessary to produce willingness-to-pay (WTP) vs. willingness-to-accept (WTA) gaps in a valuation experiment in which subjects are randomly assigned to the role of either buyer or seller. We employ a design that allows us to identify whether a subject understood the incentive properties of a price-list version of the BDM mechanism. We find a robust WTP-WTA gap, even among subjects whose elicited valuations for a good of induced and known monetary value and whose ability to identify the payoffs resulting from their choices indicate an understanding of the incentive properties of the BDM mechanism. We conclude that game form misconceptions are not a necessary condition for the emergence of WTP-WTA gaps.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:WTP-WTA gap, game from misconception, BDM mechanism, endowment effect, experimental methods, highly replicable laboratory environment
Language:English
Date:July 2015
Deposited On:09 Oct 2015 16:29
Last Modified:28 May 2016 00:00
Publisher:Springer
ISSN:2199-6776
Additional Information:The final publication is available at Springer via http://dx.doi.org/10.1007/s40881-015-0008-0
Publisher DOI:https://doi.org/10.1007/s40881-015-0008-0
Permanent URL: https://doi.org/10.5167/uzh-113257

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