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Debiasing the Becker – DeGroot – Marschak valuation mechanism

Author

Listed:
  • David de Meza

    (London School of Economics)

  • Diane Reyniers

    (London School of Economics)

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).

Suggested Citation

  • David de Meza & Diane Reyniers, 2013. "Debiasing the Becker – DeGroot – Marschak valuation mechanism," Economics Bulletin, AccessEcon, vol. 33(2), pages 1446-1456.
    • Handle: RePEc:ebl:ecbull:eb-12-00722
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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I2-P136.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Cole, Shawn & Fernando, A. Nilesh & Stein, Daniel & Tobacman, Jeremy, 2020. "Field comparisons of incentive-compatible preference elicitation techniques," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 33-56.
    2. Diekert, Florian & Eymess, Tillmann & Goeschl, Timo & Gómez-Cardona, Santiago & Luomba, Joseph, 2022. "Subsidizing Compliance: A Multi-Unit Price List Mechanism for Legal Fishing Nets at Lake Victoria," Working Papers 0711, University of Heidelberg, Department of Economics.
    3. Sebastian Lehmann, 2014. "Toward an Understanding of the BDM: Predictive Validity, Gambling Effects, and Risk Attitude," FEMM Working Papers 150001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    4. Dougherty, John P. & Flatnes, Jon Einar & Gallenstein, Richard A. & Miranda, Mario J. & Sam, Abdoul G., 2020. "Climate change and index insurance demand: Evidence from a framed field experiment in Tanzania," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 155-184.

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    More about this item

    Keywords

    BDM mechanism; bias.;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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