Private Valuation of a Public Good in Three Auction Mechanisms

Arnaud Dragicevic (1) , David Ettinger (2, 3)

1 THEMA - Théorie économique, modélisation et applications
2 LEDa - Laboratoire d'Economie de Dauphine
3 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision

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.

Mots clés: WTP-WTA disparity; auction mechanisms; public goods; private provisions

Domaines: Economies et finances

Arnaud Dragicevic, David Ettinger. Private Valuation of a Public Good in Three Auction Mechanisms. Journal of Benefit-Cost Analysis, 2011, 2 (2), pp.1-27. ⟨hal-00704708⟩