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Incentive compatibility in the field: a test of the Becker-De Groot-Marschak mechanism

Berry, Jim, Fischer, Gregory and Guiteras, Raymond (2010) Incentive compatibility in the field: a test of the Becker-De Groot-Marschak mechanism. In: The Northeast Universities Development Consortium (NEUDC) conference , 6-7 November 2010, Cambridge, USA.

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Abstract

This paper describes the field implementation and validation of the Becker‐DeGroot‐Marschak (BDM) (1964) mechanism to measure willingness to pay in the context of a point‐of‐use water treatment product in Ghana. BDM has the potential to provide precise data through which to study both screening and heterogeneous treatment effects, which are of central importance in understanding the optimal pricing and impact of health goods in the developing world. We validate BDM against valuations from a take it or leave it (TIOLI) offer in a true field setting, using sales of long‐lasting water filters to rural households in northern Ghana. We find that individuals systematically underbid in BDM relative to TIOLI. By this metric, BDM is not an accurate tool for eliciting willingness to pay. We find no evidence that these differences are driven by either anchoring to the TIOLI price or by strategic bidding on the part of respondents in the BDM treatment.

Item Type: Conference or Workshop Item (Paper)
Official URL: http://www.neudc.org/
Additional Information: © 2010 The Authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions; NGOs
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 22 Mar 2011 16:48
URL: http://eprints.lse.ac.uk/33535/

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