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A Two-Step Auction in the Presence of Negative Values: An Application to “Farm-Raised” Pre-Cooked Roast Beef

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  • Nalley, Lawton Lanier
  • Hudson, Darren

Abstract

Uniform auctions are commonly used to elicit willingness to pay for new or novel products, product attributes, or non-market goods. However, most auctions or other contingent-valuation techniques do not allow for negative values, despite the fact that many consumers hold negative values for these products or product attributes. We conducted a WTP auction for a new product along with a within-sample WTA second auction allowing for negative responses. We find that failing to allow for negative values significantly inflates willingness to pay estimates and estimates of expected market share. This paper provides a method of incorporating negative values into auctions and willingness to pay elicitation.

Suggested Citation

  • Nalley, Lawton Lanier & Hudson, Darren, 2009. "A Two-Step Auction in the Presence of Negative Values: An Application to “Farm-Raised” Pre-Cooked Roast Beef," Journal of Food Distribution Research, Food Distribution Research Society, vol. 40(2), pages 1-10, July.
    • Handle: RePEc:ags:jlofdr:99790
    DOI: 10.22004/ag.econ.99790
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    References listed on IDEAS

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    1. Jason F. Shogren & John A. Fox & Dermot J. Hayes & Jutta Roosen, 1999. "Observed Choices for Food Safety in Retail, Survey, and Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1192-1199.
    2. Evans, Jason R. & D'Souza, Gerard E. & Collins, Alan R. & Brown, Cheryl & Sperow, Mark, 2011. "Determining Consumer Perceptions of and Willingness to Pay for Appalachian Grass-Fed Beef: An Experimental Economics Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), pages 1-18, August.
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