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Do price-tags influence consumers' willingness to pay ? On external validity of using auctions for measuring value

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  • Muller, L.
  • Ruffieux, B.

Abstract

The paper considers the external validity of the growing set of literature that uses laboratory auctions to reveal consumers' willingness to pay for consumer goods, when the concerned goods are sold in retailing shops through posted prices procedures. Here, the quality of the parallel between the field and the lab crucially depends on whether being informed of the actual field price influences a consumer's willingness to pay for a good or not. We show that the elasticity of the WTP revision, according to the field price estimation error, is significant, positive and can be roughly approximate to one quarter of the error. We then discuss the normative implications of these results for future experiments aimed at eliciting private valuations through auctions.

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File URL: http://www.grenoble.inra.fr/Docs/pub/A2010/gael2010-03.pdf
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Bibliographic Info

Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 201003.

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Date of creation: 2010
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Handle: RePEc:gbl:wpaper:201003

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Keywords: EXPERIMENTAL ECONOMICS; WILLINGNESS TO PAY; AUCTION; POSTED PRICE; VALUE ELICITATION; CONSUMER BEHAVIOR;

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