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Private Valuation of a Public Good in Three Auction Mechanisms

Published online by Cambridge University Press:  19 January 2015

Arnaud Z. Dragicevic  and
David Ettinger
Arnaud Z. Dragicevic
Affiliation:
Center for Interuniversity Research and Analysis on Organizations (CIRANO)
David Ettinger
Affiliation:
Paris-Dauphine University (LEDa, CEREMADE)
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Abstract

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We evaluate the impact of three auction mechanisms—the Becker-DeGroot-Marschak (BDM) mechanism, the second-price auction (SPA), and the random nth-price auction (NPA)—in the measurement of private willingness-to-pay and willingness-to-accept for a pure public good. Our results show that the endowment effect is lower with the BDM mechanism. In this market mechanism, the effect disappears after a few repetitions. Yet, on a logarithmic scale, the random nth-price auction yields the highest speed of convergence towards equality of welfare indices. We also observe that subjects value public goods in reference to their private subjective benefit derived from their public funding.

Keywords

WTP-WTA disparityauction mechanismspublic goodsprivate provisions
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 2 , Issue 2 , 25 April 2011 , pp. 1 - 29
Copyright
Copyright © Society for Benefit-Cost Analysis 2011

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