Field Comparisons of Incentive-Compatible Preference Elicitation Techniques

56 Pages Posted: 29 Jun 2020

See all articles by Shawn Allen Cole

Shawn Allen Cole

Harvard Business School

A. Fernando

University of Notre Dame - Department of Economics

Daniel Stein

World Bank

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware

Date Written: August 26, 2019

Abstract

Knowledge of consumer demand is important for firms, policy-makers, and economists. One common tool for incentive-compatible demand elicitation, the Becker-DeGroot- Marschak (BDM) mechanism, has been widely used in laboratory settings but rarely evaluated for reliability at large scale in the field. In two field experiments (for a new agricultural information service and rainfall index insurance) we compare demand curves estimated from BDM implementations with demand curves estimated from choices at individually randomized fixed prices. In the test (for an agricultural information service) we obtain demand curves from BDM and fixed prices that align closely and are unable to reject equivalence of the demand curves. For the second test (of rainfall index insurance) the results are mixed, with the distributions lining up well at certain points of the demand curve and deviating at others. Overall, we find no evidence for systematic bias. Our evidence suggests that a ‘reframed’ version of BDM that uses discrete prices may minimize non-standard bidding behavior and is well suited to future experimental work in low-literacy environments.

Keywords: Incentive-compatible elicitation, experimental methods, weather insurance, rainfall insurance, agricultural extension.

JEL Classification: C81, C93, D12, D14

Suggested Citation

Cole, Shawn Allen and Fernando, A. and Stein, Daniel and Tobacman, Jeremy, Field Comparisons of Incentive-Compatible Preference Elicitation Techniques (August 26, 2019). Journal of Economic Behavior and Organization, Vol. 172, 2020, Available at SSRN: https://ssrn.com/abstract=3620027 or http://dx.doi.org/10.2139/ssrn.3620027

Shawn Allen Cole

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

A. Fernando (Contact Author)

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

HOME PAGE: http://www.nileshfernando.com

Daniel Stein

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware ( email )

Newark, DE 19716
United States

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