Tangible Goods Simulation for Field BDM Auctions
RCTClinical Trial
Eliciting true willingness to pay for complex financial contracts in low-literacy field settings using Becker-DeGroot-Marschak (BDM) mechanisms frequently fails due to subject confusion regarding pricing rules.
Picture this
Before asking someone to place real cash bids on a complex multi-page financial contract, you let them play a practice round bidding 5 cents on a candy bar so they visually see how higher and lower bids win or lose the prize.
What the evidence says
Practice rounds enabled successful implementation of 4-contract BDM elicitations across 1,978 rural subjects, resulting in zero instances of participants refusing to complete winning transactions.
- Who was studied
- N = 1,978 smallholder farmers in rural Andhra Pradesh, India.
- How
- Incentive-compatible BDM field game protocol incorporating mandatory preliminary practice rounds bidding on a chocolate bar prior to financial policy elicitations.
What to do
Conduct practice bidding rounds using simple tangible items like chocolate bars before administering BDM willingness-to-pay mechanisms for complex financial products.
From the source
"Individuals had the opportunity to familiarize themselves with the structure of the game by simulating the initial round of the game bidding for a chocolate bar."
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