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Relative willingness to pay and surplus comparison mechanism in experimental auctions

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  • COMBRIS Pierre
  • SEABRA PINTO Alexandra
  • GIRAUD HERAUD Eric

Abstract

We study the relative willingness-to-pay (WTP) of consumers according to the diversity of supply in a market and we show how the presence of substitutes for a given product leads to question the incentive mechanisms commonly used in experimental auctions. We propose a Surplus Comparison Mechanism (SCM) in order to yield WTP estimates which better take into account the choice set available to consumers. After showing the efficiency of this mechanism we test the SCM in a laboratory experiment, reconsidering WTP for food environmental certifications (Integrated Pest Management and Organic certification). It appears that WTPs are decreasing when more alternative certifications are offered to consumers.

Suggested Citation

  • COMBRIS Pierre & SEABRA PINTO Alexandra & GIRAUD HERAUD Eric, 2015. "Relative willingness to pay and surplus comparison mechanism in experimental auctions," Cahiers du GREThA (2007-2019) 2015-20, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
  • Handle: RePEc:grt:wpegrt:2015-20
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    File URL: http://cahiersdugretha.u-bordeaux.fr/2015/2015-20.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Experimental Auctions; Willingness to pay; Consumers’ surplus; Choice alternatives; Food certification.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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