Presenter: Alexander L. Brown
Paper: “Is There a Better Way to Elicit Valuations than the BDM?” joint work with Jinliang Liu and Michael Tsoi.
Abstract:
The dominant-strategy Becker-Degroot-Marschak (BDM) mechanism is the prevailing mechanism for eliciting individuals’ valuations within economic research. However, recent research has highlighted systematic bidding mistakes under the BDM mechanism. This paper provides the means to have the largest comprehensive standardized test of all such elicitation mechanisms that are strategically-equivalent but cognitively-simpler than the BDM mechanism. We examine a BDM design for induced-value sellers in a controlled, laboratory environment. Treatments vary across three additional formats of elicitation mechanisms: (1) a descending price clock mechanism that satisfies refinements of dominant strategy, namely obviousness; (2) a BDM mechanism with additional contingent protocols that improves subjects’ understanding of the payoff function; and (3) a dynamic multiple price list with descending prices that simplifies the structure of the game. Our experimental results show that (3) appears to improve the game form misconceptions of the BDM mechanism but cannot improve overall accuracy of bids. Meanwhile, contrary to previous theoretical findings and online experiments, neither (1) nor (2) provides more accurate elicited values than the BDM mechanism in the laboratory.