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On the applicability of the BDM mechanism in product evaluation

Author

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  • Lichters, Marcel
  • Wackershauser, Verena
  • Han, Shixing
  • Vogt, Bodo

Abstract

The Becker-DeGroot-Marschak (BDM) procedure for measuring consumers’ willingness to pay (WTP) is widely esteemed, since it is considered to be incentive-compatible. This study investigates BDM's applicability in product evaluation by implementing a facultative resell option at the actual market price. Under this condition, rational individuals should bid at least the market price. However, the results demonstrate that participants’ stated WTP is significantly lower. They also confirm that consumers’ purchase interest governs their inclination to engage in "irrational" bidding behavior and, thereby, provide a deeper understanding on consumers’ misconceptions about the BDM procedure.

Suggested Citation

  • Lichters, Marcel & Wackershauser, Verena & Han, Shixing & Vogt, Bodo, 2019. "On the applicability of the BDM mechanism in product evaluation," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 1-7.
    • Handle: RePEc:eee:joreco:v:51:y:2019:i:c:p:1-7
    DOI: 10.1016/j.jretconser.2019.02.021
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