Mitigating overbidding behavior in agribusiness and food marketing research: Results from induced value hybrid auction experiments

Abstract

AbstractExperimental auctions are a popular and useful tool in understanding demand for food and agricultural products. Bidding behavior often deviates from theoretical predictions in traditional Vickrey and Becker–DeGroot–Marschak (BDM) auction mechanisms. We propose and explore the bidding behavior and demand revealing properties of a hybrid first price‐Vickrey auction and a hybrid first price‐BDM mechanism. Results from a between‐sample, induced value experiment reveal that, relative to traditional mechanisms, the hybrid first price‐Vickrey auction and hybrid first price‐BDM mechanism significantly reduce participants’ likelihood of overbidding, and on average yield bids closer to true valuations. We discuss potential limitations to these hybrid mechanisms as well as implications for their use in eliciting homegrown values that are important for agribusiness and food marketing research. [EconLit citations: C8, C9, Q1, Q13]