Off the reservation: Pushing the bounds of rationality in experimental auctions

The use of experimental economics in valuation of market and non-market goods has grown considerably over the past few years. The ability of experimental auctions (EAs) to reveal consumer preferences and their malleability have been greatly praised by researchers across the profession. Because of the high cost of conducting EAs, researchers have a vested interest in extracting as much information as possible from the research sample, usually presenting multiple products or product alternatives to participants. In the last decade large amounts of work has been done to improve the methodology and design of EAs. However, choosing how many products or product alternatives to use has no clear guideline. Findings of this study support a “choice overload” phenomenon even with a relatively small number of products used for auction. Mean willingness to pay was found to be a decreasing function of the number of alternatives presented to participants. A heteroscedastic error variance scaler was estimated and it was found to be a decreasing function of the number of alternatives presented, implying more variance across responses as the number of alternatives increases.

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JEL Codes:
C91; C18
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 Record created 2017-04-01, last modified 2020-10-28

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