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Do People Always Pay Less Than They Say? Testbed Laboratory Experiments With IV and HG Values

Jacquemet, Nicolas; Joule, Robert-Vincent; Luchini, Stéphane; Shogren, Jason F. (2011), Do People Always Pay Less Than They Say? Testbed Laboratory Experiments With IV and HG Values, Journal of Public Economic Theory, 13, 5, p. 857-882. http://dx.doi.org/10.1111/j.1467-9779.2011.01522.x

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Type
Article accepté pour publication ou publié
Date
2011
Journal name
Journal of Public Economic Theory
Volume
13
Number
5
Publisher
Wiley
Pages
857-882
Publication identifier
http://dx.doi.org/10.1111/j.1467-9779.2011.01522.x
Metadata
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Author(s)
Jacquemet, Nicolas cc
Joule, Robert-Vincent
Luchini, Stéphane cc
Shogren, Jason F.
Abstract (EN)
Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies—people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both induced (IV) and homegrown (HG) values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an IV, private good context and (ii) persists in HG values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation.” In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.
Subjects / Keywords
Auctions; Demand revelation; Experimental valuation; Hypothetical bias
JEL
Q0 - General
C9 - Design of Experiments
C7 - Game Theory and Bargaining Theory

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