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The Role of Confidence in Truthful Revelation of Private Values

Published online by Cambridge University Press:  15 September 2016

Gregory M. Parkhurst  and
Clifford Nowell
Gregory M. Parkhurst*
Affiliation:
Department of Economics at Weber State University
Clifford Nowell
Affiliation:
Department of Economics at Weber State University
*
Correspondence: Department of Economics, Weber State University, 3107 University Circle, Ogden, UT 84408, Phone 801.626.6792, Email gregoryparkhurst@weber.edu.
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Abstract

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.

Keywords

BDMBecker-DeGroot-Marschak mechanismconfidenceinduced valuetruthful revelationwillingness to acceptwillingness to pay
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 43 , Issue 2 , August 2014 , pp. 193 - 208
Copyright
Copyright © 2014 Northeastern Agricultural and Resource Economics Association 

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