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Debiasing the Becker – DeGroot – Marschak valuation mechanism

de Meza, David and Reyniers, Diane J. (2013) Debiasing the Becker – DeGroot – Marschak valuation mechanism. Economics Bulletin, 33 (2). pp. 1446-1456. ISSN 1545-2921

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Abstract

This experiment finds that the Becker-DeGroot-Marschak (BDM) (1964) valuation mechanism under-predicts the proportion of subjects choosing cash over an item. The extent of the divergence is increasing in risk aversion, which is consistent with reference dependent preferences. This suggests a reframing of the BDM to improve its performance. The modified BDM mechanism is found to better match choices at a single offer price (SOP).

Item Type: Article
Official URL: http://ideas.repec.org/s/ebl/ecbull.html
Additional Information: © 2013 The Authors
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Management
Collections > Economists Online
Date Deposited: 31 Jul 2013 09:05
Last Modified: 31 Jul 2013 09:05
URI: http://eprints.lse.ac.uk/id/eprint/51250

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