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

Author

Listed:
  • 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.

Suggested Citation

  • Muller, L. & Ruffieux, B., 2010. "Do price-tags influence consumers' willingness to pay ? On external validity of using auctions for measuring value," Working Papers 201003, Grenoble Applied Economics Laboratory (GAEL).
    • Handle: RePEc:gbl:wpaper:201003
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    Cited by:

    1. Sebastian Lehmann, 2014. "Toward an Understanding of the BDM: Predictive Validity, Gambling Effects, and Risk Attitude," FEMM Working Papers 150001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    2. Kanya, Lucy & Sanghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: A systematic review and meta-analysis of the evidence," Social Science & Medicine, Elsevier, vol. 232(C), pages 238-261.
    3. Erpeng Wang & Zhifeng Gao, 2017. "Chinese Consumer Quality Perception and Preference of Traditional Sustainable Rice Produced by the Integrated Rice–Fish System," Sustainability, MDPI, vol. 9(12), pages 1-13, December.
    4. Chenyi He & Ruifeng Liu & Zhifeng Gao & Xin Zhao & Charles A. Sims & Rodolfo M. Nayga, 2021. "Does local label bias consumer taste buds and preference? Evidence of a strawberry sensory experiment," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 550-568, July.
    5. Emilie Ginon & Pierre Combris & Youenn Loheac & Géraldine Enderli & Sylvie Issanchou, 2014. "What do we learn from comparing hedonic scores and willingness-to-pay data?," Post-Print hal-00950490, HAL.
    6. Eva Tebbe & Korbinian von Blanckenburg, 2018. "Does willingness to pay increase with the number and strictness of sustainability labels?," Agricultural Economics, International Association of Agricultural Economists, vol. 49(1), pages 41-53, January.
    7. Shi, Lijia & Gao, Zhifeng & Chen, Xuqi, 2014. "The cross-price effect on willingness-to-pay estimates in open-ended contingent valuation," Food Policy, Elsevier, vol. 46(C), pages 13-21.
    8. Azucena GRACIA & Tiziana DE-MAGISTRIS, 2015. "The role of participants' competitiveness in consumers' valuation for food products using experimental auctions," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(10), pages 484-491.
    9. Kanya, Lucy & Saghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: a systematic review and meta-analysis of the evidence," LSE Research Online Documents on Economics 100741, London School of Economics and Political Science, LSE Library.
    10. Stephane Bergeron & Maurice Doyon & Laurent Muller, 2019. "Strategic response: A key to understand how cheap talk works," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 67(1), pages 75-83, March.

    More about this item

    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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