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Auction Bids and Shopping Choices

Author

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  • Lusk Jayson L

    () (Oklahoma State Universtiy)

  • Schroeder Ted C.

    () (Kansas State University)

Abstract

Economists and marketers are often interested in estimating demand for new products and in valuing other non-market goods. Due to the increasing recognition that elicited valuations are sensitive to whether decisions are hypothetical, economists have begun to utilize incentive compatible mechanisms with real goods and real money. This paper investigates preferences expressed in two of the most popular elicitation formats: experimental auctions and discrete choice experiments. We compare the bidding behavior of consumers in four different incentive compatible auctions to the behavior of consumers who made non-hypothetical discrete choices between five goods. Despite the fact that the choice task and auction mechanisms are incentive compatible, we find that auction bids were significantly lower, as much as two times lower in many cases, than valuations implied from choices. We also find that auction data imply own-price elasticities of demand for higher quality products that are significantly more elastic than those implied from choice data. Nevertheless, for the five goods evaluated, individuals' preference orderings were consistent across value elicitation methods. These findings hold important implications for economists' view of preferences and may provide some insight into retailers' prevalent use of markets with posted-prices: individuals were more willing to part with their cash when making choices versus bids.

Suggested Citation

  • Lusk Jayson L & Schroeder Ted C., 2006. "Auction Bids and Shopping Choices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-39, August.
  • Handle: RePEc:bpj:bejeap:v:advances.6:y:2006:i:1:n:4
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    Citations

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    Cited by:

    1. Avitia, Jessica & Costa-Font, Montserrat & Gil, Jose Maria & Lusk, Jayson L., 2011. "A Calibrate Auction-conjoint Experiment to Elicit Consumer Valuation of Sustainable Farming: Is Agro-systems Preservation Relevant?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114213, European Association of Agricultural Economists.
    2. Teisl, Mario F. & Roe, Brian E., 2010. "Consumer willingness-to-pay to reduce the probability of retail foodborne pathogen contamination," Food Policy, Elsevier, vol. 35(6), pages 521-530, December.
    3. Yue, Chengyan & Hall, Charles R. & Behe, Bridget K. & Campbell, Benjamin L. & Dennis, Jennifer H. & Lopez, Roberto G., 2010. "Are Consumers Willing to Pay More for Biodegradable Containers Than for Plastic Ones? Evidence from Hypothetical Conjoint Analysis and Nonhypothetical Experimental Auctions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 42(04), pages 757-772, November.
    4. Jutta Roosen & Stephan Marette & Sandrine Blanchemanche, 2010. "Value Elicitation using BDM and a Discrete Choice Mechanism," Economics Bulletin, AccessEcon, vol. 30(2), pages 1554-1563.
    5. Grebitus, Carola & Lusk, Jayson L. & Nayga, Rodolfo M., 2013. "Explaining differences in real and hypothetical experimental auctions and choice experiments with personality," Journal of Economic Psychology, Elsevier, vol. 36(C), pages 11-26.
    6. St├ęphan Marette & Jayson L. Lusk & Jutta Roosen, 2010. "Welfare Impact of Information with Experiments: The Crucial Role of the Price Elasticity of Demand," Economics Bulletin, AccessEcon, vol. 30(2), pages 1585-1593.
    7. Kassas, Bachir & Palma, Marco A. & Zhang, Yvette, 2016. "The role of incentives on preference revelations in auctions versus rankings," Journal of choice modelling, Elsevier, vol. 20(C), pages 73-85.
    8. Banerji, A. & Chowdhury, Shyamal K. & de Groote, Hugo & Meenakshi, Jonnalagadda V. & Haleegoah, Joyce & Ewoo, Manfred, 2013. "Using elicitation mechanisms to estimate the demand for nutritious maize: Evidence from experiments in rural Ghana," HarvestPlus Working Papers 10, International Food Policy Research Institute (IFPRI).
    9. Michaud, C. & Llerena, D., 2008. "Eliciting values for environmental attributes of a private good using a real choice experiment," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44234, European Association of Agricultural Economists.
    10. Meenakshi, J. V. & Banerji, A. & Manyong, Victor & Tomlins, Keith & Hamukwala, Priscilla & Zulu, Rodah & Mungoma, Catherine, 2010. "Consumer acceptance of provitamin A orange maize in rural Zambia:," HarvestPlus Working Papers 4, International Food Policy Research Institute (IFPRI).
    11. Levan Elbakidze & Rodolfo M. Nayga Jr. & Hao Li & Chris McIntosh, 2014. "Value elicitation for multiple quantities of a quasi-public good using open ended choice experiments and uniform price auctions," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 253-265, March.
    12. Cash, Sean B. & McAlister, Anna R., 2017. "Young Food Consumers: How do Children Respond to Point-of-Purchase Interventions?," 2017 Allied Social Science Association (ASSA) Annual Meeting, January 6-8, 2017, Chicago, Illinois 252700, Agricultural and Applied Economics Association.
    13. Meenakshi, J.V. & Banerji, A. & Manyong, Victor & Tomlins, Keith & Mittal, Nitya & Hamukwala, Priscilla, 2012. "Using a discrete choice experiment to elicit the demand for a nutritious food: Willingness-to-pay for orange maize in rural Zambia," Journal of Health Economics, Elsevier, vol. 31(1), pages 62-71.
    14. Xie, Jing & Gao, Zhifeng & House, Lisa, 2013. "The Puzzle of Valuation Gaps Between Experimental Auction and Real Choice Experiments: Do Purchase Intention and Price Bargaining Preference Matter?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151282, Agricultural and Applied Economics Association.
    15. Lusk, Jayson L. & Norwood, F. Bailey, 2009. "Bridging the gap between laboratory experiments and naturally occurring markets: An inferred valuation method," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 236-250, September.

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