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Status-Quo-Bias and Voluntary Contributions: Can Lab Experiments Parallel Real World Outcomes for Generic Advertising?

Author

Listed:
  • Messer, Kent D.
  • Kaiser, Harry M.
  • Schulze, William D.

Abstract

Many commodities have programs assessing producers for generic advertising. Ads such as "Got Milk?" and the "Incredible Edible Egg" are a public good for producers. Most of these programs originally used the Voluntary Contribution Mechanism, but have now become mandatory because of free-riding. This research simulates both the economic and psychological details of the egg industry in experiments that produce strikingly realistic results. Because mandatory programs have recently been declared unconstitutional, we also the test the Provision Point Mechanism and show that observed low levels of free-riding for both mechanisms are the result of status quo bias.

Suggested Citation

  • Messer, Kent D. & Kaiser, Harry M. & Schulze, William D., 2004. "Status-Quo-Bias and Voluntary Contributions: Can Lab Experiments Parallel Real World Outcomes for Generic Advertising?," 2004 Annual meeting, August 1-4, Denver, CO 20072, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea04:20072
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    References listed on IDEAS

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    1. Mark Isaac, R. & McCue, Kenneth F. & Plott, Charles R., 1985. "Public goods provision in an experimental environment," Journal of Public Economics, Elsevier, vol. 26(1), pages 51-74, February.
    2. Marks, Melanie B & Croson, Rachel T A, 1999. "The Effect of Incomplete Information in a Threshold Public Goods Experiment," Public Choice, Springer, vol. 99(1-2), pages 103-118, April.
    3. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 2002. "The private provision of public goods: tests of a provision point mechanism for funding green power programs," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 131-155, February.
    4. R. Isaac & David Schmidtz & James Walker, 1989. "The assurance problem in a laboratory market," Public Choice, Springer, vol. 62(3), pages 217-236, September.
    5. repec:cup:apsrev:v:80:y:1986:i:04:p:1171-1185_18 is not listed on IDEAS
    6. Reberte, J. Carlos & Schmit, Todd M. & Kaiser, Harry M., 1996. "An Ex Post Evaluation of Generic Egg Advertising in the U.S," Research Bulletins 122835, Cornell University, Department of Applied Economics and Management.
    7. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    8. Marks, Melanie & Croson, Rachel, 1998. "Alternative rebate rules in the provision of a threshold public good: An experimental investigation," Journal of Public Economics, Elsevier, vol. 67(2), pages 195-220, February.
    9. Johnson, Eric J & Hershey, John & Meszaros, Jacqueline & Kunreuther, Howard, 1993. "Framing, Probability Distortions, and Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 35-51, August.
    10. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    11. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 351-366, April.
    12. Gregory Poe & Jeremy Clark & Daniel Rondeau & William Schulze, 2002. "Provision Point Mechanisms and Field Validity Tests of Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(1), pages 105-131, September.
    13. repec:oup:revage:v:25:y:2003:i:2:p:294-315. is not listed on IDEAS
    14. John M. Crespi, 2003. "The Generic Advertising Controversy: How Did We Get Here and Where Are We Going?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 294-315.
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    Citations

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    Cited by:

    1. Kent D. Messer & Todd M. Schmit & Harry M. Kaiser, 2005. "Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1046-1060.
    2. Kent D. Messer & Harry M. Kaiser & Gregory L. Poe, 2007. "Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 612-631.
    3. Norwood, F. Bailey, 2005. "Can Calibration Reconcile Stated and Observed Preferences?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(01), April.

    More about this item

    Keywords

    Marketing; H40; H41; M37;

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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