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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. Working paper series / Department of Economics 180, University of Zurich.

Abstract

Cason and Plott (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.

Abstract

Cason and Plott (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:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C91, D03
Uncontrolled Keywords:WTP-WTA gap, game from misconception, BDM mechanism, endowment effect, experimental methods, highly replicable laboratory environment
Language:English
Date:April 2015
Deposited On:18 Nov 2014 13:42
Last Modified:08 Dec 2017 08:11
Series Name:Working paper series / Department of Economics
Number of Pages:15
ISSN:1664-7041
Additional Information:Revised version ; Former title: Game Form Misconceptions Do Not Explain the Endowment Effect
Official URL:http://www.econ.uzh.ch/static/wp/econwp180.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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