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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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    File URL: https://gael.univ-grenoble-alpes.fr/sites/gael/files/doc-recherche/WP/A2010/gael2010-03.pdf
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    More about this item

    Keywords

    EXPERIMENTAL ECONOMICS; WILLINGNESS TO PAY; AUCTION; POSTED PRICE; VALUE ELICITATION; CONSUMER BEHAVIOR;

    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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