The Role of Confidence in Truthful Revelation of Private Values

Recent research shows that disparities between willingness to pay (WTP) and willingness to accept (WTA) disappear with market experience and training. In effect, preferences can be refined by eliminating subjects’ misconceptions regarding elicitation procedures. We use a stated measure of confidence...

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Bibliographic Details
Published in:Agricultural and resource economics review 2014-08, Vol.43 (2), p.193-208
Main Authors: Parkhurst, Gregory M., Nowell, Clifford
Format: Article
Language:English
Subjects:
Bias
Endowment
Experiments
Laboratories
Success
Valuation
Willingness to pay
Citations: Items that this one cites
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Summary:Recent research shows that disparities between willingness to pay (WTP) and willingness to accept (WTA) disappear with market experience and training. In effect, preferences can be refined by eliminating subjects’ misconceptions regarding elicitation procedures. We use a stated measure of confidence as a proxy for misconceptions and test the influence of confidence on truthful revelation of induced values in WTP and WTA auctions using the Becker-DeGroot-Marschak (BDM) mechanism. The results indicate that confidence matters for buyers and sellers. With confidence, WTA and WTP measures converge, and people with greater confidence choose the dominant bidding strategy more frequently.
ISSN:1068-2805
2372-2614
DOI:10.1017/S1068280500004275