IDEAS home Printed from https://ideas.repec.org/p/grt/wpegrt/2015-20.html
   My bibliography  Save this paper

Relative willingness to pay and surplus comparison mechanism in experimental auctions

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://cahiersdugretha.u-bordeaux.fr/2015/2015-20.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    2. Simonson, Itamar, 1989. "Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, Oxford University Press, vol. 16(2), pages 158-174, September.
    3. Ty Feldkamp & Ted C. Schroeder, 2004. "Experimental Auction Procedure: Impact on Valuation of Quality Differentiated Goods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 389-405.
    4. P. Bazoche & P. Combris & Eric Giraud-Heraud & A. Seabra Pinto & F. Bunte & E. Tsakiridou, 2013. "Willingness to pay for pesticide reduction in the EU: nothing but organic?," Post-Print hal-03143263, HAL.
    5. Pascale Bazoche & Pierre Combris & Eric Giraud-Héraud & Alexandra Seabra Pinto & Frank Bunte & Efthimia Tsakiridou, 2014. "Willingness to pay for pesticide reduction in the EU: nothing but organic?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 41(1), pages 87-109, February.
    6. Lusk, Jayson L. & Jamal, Mustafa & Kurlander, Lauren & Roucan, Maud & Taulman, Lesley, 2005. "A Meta-Analysis of Genetically Modified Food Valuation Studies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(1), pages 1-17, April.
    7. Bazerman, Max H. & Moore, Don A. & Tenbrunsel, Ann E. & Wade-Benzoni, Kimberly A. & Blount, Sally, 1999. "Explaining how preferences change across joint versus separate evaluation," Journal of Economic Behavior & Organization, Elsevier, vol. 39(1), pages 41-58, May.
    8. Cohen, Joel B & Basu, Kunal, 1987. "Alternative Models of Categorization: Toward a Contingent Processing Framework," Journal of Consumer Research, Oxford University Press, vol. 13(4), pages 455-472, March.
    9. Huber, Joel & Payne, John W & Puto, Christopher, 1982. "Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research, Oxford University Press, vol. 9(1), pages 90-98, June.
    10. Horowitz, John K., 2006. "The Becker-DeGroot-Marschak mechanism is not necessarily incentive compatible, even for non-random goods," Economics Letters, Elsevier, vol. 93(1), pages 6-11, October.
    11. Frode Alfnes, 2009. "Valuing product attributes in Vickrey auctions when market substitutes are available," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(2), pages 133-149, June.
    12. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    13. Roosen, Jutta & Fox, John A. & Hennessy, David A. & Schreiber, Alan, 1998. "Consumers' Valuation Of Insecticide Use Restrictions: An Application To Apples," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-18, December.
    14. Lusk, Jayson L. & House, Lisa O. & Valli, Carlotta & Jaeger, Sara R. & Moore, Melissa & Morrow, Bert & Traill, W. Bruce, 2005. "Consumer welfare effects of introducing and labeling genetically modified food," Economics Letters, Elsevier, vol. 88(3), pages 382-388, September.
    15. Charles Noussair & StÈphane Robin & Bernard Ruffieux, 2004. "Do Consumers Really Refuse To Buy Genetically Modified Food?," Economic Journal, Royal Economic Society, vol. 114(492), pages 102-120, January.
    16. Rousu Matthew C. & Corrigan Jay R., 2008. "Estimating the Welfare Loss to Consumers When Food Labels Do Not Adequately Inform: An Application to Fair Trade Certification," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-26, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raineau, Yann & Giraud-Héraud, Éric & Lecocq, Sébastien & Pérès, Stéphanie & Pons, Alexandre & Tempère, Sophie, 2023. "When health-related claims impact environmental demand: Results of experimental auctions with Bordeaux wine consumers," Ecological Economics, Elsevier, vol. 204(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Combris, Pierre & Giraud-Héraud, Eric & Pinto, Alexandra Seabra, 2015. "Relative willingness to pay and surplus comparison mechanism," 143rd Joint EAAE/AAEA Seminar, March 25-27, 2015, Naples, Italy 202755, European Association of Agricultural Economists.
    2. Irz, Xavier & Mazzocchi, Mario & Réquillart, Vincent & Soler, Louis-Georges, 2015. "Research in Food Economics: past trends and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 187-237, March.
    3. GianCarlo Moschini, 2008. "Biotechnology and the development of food markets: retrospect and prospects," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 35(3), pages 331-355, September.
    4. Bernard Ruffieux & Anne Rozan & Stéphane Robin, 2008. "Mesurer les préférences du consommateur pour orienter les décisions des pouvoirs publics : l'apport de la méthode expérimentale," Économie et Prévision, Programme National Persée, vol. 182(1), pages 113-127.
    5. Castillo, Geoffrey, 2020. "The attraction effect and its explanations," Games and Economic Behavior, Elsevier, vol. 119(C), pages 123-147.
    6. Georgios Gerasimou, 2016. "Asymmetric dominance, deferral, and status quo bias in a behavioral model of choice," Theory and Decision, Springer, vol. 80(2), pages 295-312, February.
    7. Maltz, Amnon & Rachmilevitch, Shiran, 2021. "A model of menu-dependent evaluations and comparison-aversion," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 91(C).
    8. Fabio Galeotti & Maria Montero & Anders Poulsen, 2017. "The attraction and compromise effects in bargaining: Experimental evidence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 17-04, School of Economics, University of East Anglia, Norwich, UK..
    9. Ronayne, David & Brown, Gordon D.A., 2016. "Multi-attribute decision by sampling: An account of the attraction, comprimise and similarity effects," The Warwick Economics Research Paper Series (TWERPS) 1124, University of Warwick, Department of Economics.
    10. Alfio Giarlotta & Angelo Petralia & Stephen Watson, 2022. "Semantics meets attractiveness: Choice by salience," Papers 2204.08798, arXiv.org, revised Aug 2022.
    11. Frode Alfnes, 2007. "Willingness to Pay versus Expected Consumption Value in Vickrey Auctions for New Experience Goods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 921-931.
    12. Inderst, Roman & Obradovits, Martin, 2019. "Competitive Strategies when Consumers are Relative Thinkers: Implications for Pricing, Promotions, and Product Choice," EconStor Preprints 253658, ZBW - Leibniz Information Centre for Economics.
    13. Ay, Jean-Sauveur & Chakir, Raja & Marette, Stephan, 2014. "Does living close to a vineyard increase the willingness-to-pay for organic and local wine?," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 183075, European Association of Agricultural Economists.
    14. Barna Bakó & Gábor Neszveda & Linda Dezső, 2018. "When irrelevant alternatives do matter. The effect of focusing on loan decisions," Theory and Decision, Springer, vol. 84(1), pages 123-141, January.
    15. Bakó, Barna & Neszveda, Gábor, 2020. "The Achilles’ heel of Salience theory and a way to fix it," Economics Letters, Elsevier, vol. 193(C).
    16. A. Ye(scedilla)im Orhun, 2009. "Optimal Product Line Design When Consumers Exhibit Choice Set-Dependent Preferences," Marketing Science, INFORMS, vol. 28(5), pages 868-886, 09-10.
    17. Quan Zheng & Xiajun Amy Pan & Janice E. Carrillo, 2019. "Probabilistic Selling for Vertically Differentiated Products with Salient Thinkers," Marketing Science, INFORMS, vol. 38(3), pages 442-460, May.
    18. Bruner, David M. & Huth, William L. & McEvoy, David M. & Morgan, O. Ashton, 2014. "Consumer Valuation of Food Safety: The Case of Postharvest Processed Oysters," Agricultural and Resource Economics Review, Cambridge University Press, vol. 43(2), pages 300-318, August.
    19. Laurent Muller & Bernard Ruffieux, 2011. "Do price-tags influence consumers’ willingness to pay? On the external validity of using auctions for measuring value," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 181-202, May.
    20. Li, Hao & Elbakidze, Levan, 2016. "Application of Regression Discontinuity Approach in Experimental Auctions: A Case Study of Gaining Participants’ Trust and Their Willingness to Pay," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236149, Agricultural and Applied Economics Association.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:grt:wpegrt:2015-20. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ifredfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ernest Miguelez (email available below). General contact details of provider: https://edirc.repec.org/data/ifredfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.