Order Independence in Field BDM Valuation
RCTClinical Trial
Valuation elicitations using multi-contract BDM auctions in field settings risk order-dependent anchoring biases, where initial contract presentations artificially anchor subsequent willingness-to-pay bids.
Picture this
Imagine evaluating four houses in a row; if viewing an expensive mansion first causes someone to bid higher on a small cottage afterwards, the valuation tool is broken, but if the bidding price for the cottage remains identical regardless of house order, the measurement tool is robust.
What the evidence says
Mean willingness-to-pay bids were virtually identical across orderings (Real policy: Rs. 69.0 in Ordering 1 vs. Rs. 67.9 in Ordering 2; Basis risk policy: Rs. 38.9 vs. Rs. 39.1), confirming complete order independence.
- Who was studied
- N = 1,978 smallholder farmers in rural Andhra Pradesh, India.
- How
- Randomized contract presentation sequence (Ordering 1: Real, Exit, mm deficit, Basis risk vs. Ordering 2: Basis risk, mm deficit, Exit, Real) in an incentive-compatible BDM field game.
What to do
Randomize and test presentation sequences when deploying incentive-compatible BDM auctions to ensure contract valuation measurements are free from cognitive anchoring biases.
From the source
"As is apparent from the similarity between the numbers listed in the two columns, the order in which the policies were presented did not significantly affect farmers' willingness to pay."
How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment