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Willingness to Pay versus Expected Consumption Value in Vickrey Auctions for New Experience Goods
- Alfnes, Frode
- American journal of agricultural economics 2007 v.89 no.4 pp. 921-931
- agricultural economics, willingness to pay, consumer acceptance, new products, novel foods, brand name products, consumer attitudes, contingent valuation, consumers, market prices, agricultural land, farmland preservation, agricultural policy, econometric models, land use
- Over the past two decades, Vickrey auctions have been widely used to elicit willingness to pay for new food products. This article shows that in a multiperiod context, it can be optimal for consumers to bid higher than the expected consumption value for a new experience good to obtain information about how the new good fits into their preference set. The degree of uncertainty about the consumption value, the purchasing frequency, and expected future market prices affect both the expected value of the quality information and the subgame perfect bidding strategy in Vickrey auctions for new experience goods.