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Field comparisons of incentive-compatible preference elicitation techniques

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  • Cole, Shawn
  • Fernando, A. Nilesh
  • Stein, Daniel
  • Tobacman, Jeremy

Abstract

Knowledge of consumer demand is important for firms, policy-makers, and economists. One common tool for incentive-compatible demand elicitation, the Becker-DeGroot-Marschak (BDM) mechanism, has been widely used in laboratory settings but rarely evaluated for reliability at large scale in the field. In two field experiments (for a new agricultural information service and rainfall index insurance) we compare demand curves estimated from BDM implementations with demand curves estimated from choices at individually randomized fixed prices. In the test (for an agricultural information service) we obtain demand curves from BDM and fixed prices that align closely and are unable to reject equivalence of the demand curves. For the second test (of rainfall index insurance) the results are mixed, with the distributions lining up well at certain points of the demand curve and deviating at others. Overall, we find no evidence for systematic bias. Our evidence suggests that a ‘reframed’ version of BDM that uses discrete prices may minimize non-standard bidding behavior and is well suited to future experimental work in low-literacy environments.

Suggested Citation

  • Cole, Shawn & Fernando, A. Nilesh & Stein, Daniel & Tobacman, Jeremy, 2020. "Field comparisons of incentive-compatible preference elicitation techniques," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 33-56.
    • Handle: RePEc:eee:jeborg:v:172:y:2020:i:c:p:33-56
    DOI: 10.1016/j.jebo.2020.01.021
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    References listed on IDEAS

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    2. Jack, B. Kelsey & McDermott, Kathryn & Sautmann, Anja, 2022. "Multiple price lists for willingness to pay elicitation," Journal of Development Economics, Elsevier, vol. 159(C).
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    4. Herrington, Caitlin L. & Ortega, David L. & Maredia, Mywish K. & Reyes, Byron A., 2023. "Does Bid Quantity Matter? Comparing Farmer Willingness-to-Pay for Specified vs Open-Ended Quantities of Biofortified Bean and Maize Seed in a Non-hypothetical Field Experiment," 2023 Annual Meeting, July 23-25, Washington D.C. 335919, Agricultural and Applied Economics Association.
    5. Channa, Hira & Chen, Amy Z. & Pina, Patricia & Ricker-Gilbert, Jacob & Stein, Daniel, 2019. "What drives smallholder farmers’ willingness to pay for a new farm technology? Evidence from an experimental auction in Kenya," Food Policy, Elsevier, vol. 85(C), pages 64-71.
    6. Sarah Janzen & Nicholas Magnan & Conner Mullally & Soye Shin & I. Bailey Palmer & Judith Oduol & Karl Hughes, 2021. "Can Experiential Games and Improved Risk Coverage Raise Demand for Index Insurance? Evidence from Kenya," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(1), pages 338-361, January.
    7. Diekert, Florian & Eymess, Tillmann & Goeschl, Timo & Gómez-Cardona, Santiago & Luomba, Joseph, 2022. "Subsidizing Compliance: A Multi-Unit Price List Mechanism for Legal Fishing Nets at Lake Victoria," Working Papers 0711, University of Heidelberg, Department of Economics.

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    More about this item

    Keywords

    Incentive-compatible elicitation; Experimental methods; Weather insurance; Rainfall insurance; Agricultural extension;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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