In Simple Words
Imagine a secret auction where a worker submits their lowest acceptable price for a job. A random wage offer is then drawn from a jar. If the jar's wage is at least as high as the worker's bid, the worker gets hired at the jar's wage; if lower, the worker isn't hired. Because workers cannot increase their pay by bidding higher and risk losing out on profitable work, bidding their exact true minimum acceptable wage is the best strategy.
Research question
Measuring worker reservation wages in observational labor markets is prone to strategic misreporting and confounding between offered pay rates and worker ability.
Participants
N = 689 rural Malawian casual laborers (66.5% female, 1,875 daily decisions).
Study Design
Simplified Becker-DeGroot-Marschak (BDM) mechanism with 5 discrete piece rates (5, 10, 15, 20, 25 MWK per unit sorted) and random draws from a uniform distribution over 4 consecutive days in 12 villages.
Results
Over 60% of participants accepted low piece rates (10 MWK/unit, yielding ~70 MWK daily earnings plus 50 MWK participation fee). Ex-post refusal rates were under 3% and declined over time, confirming that workers learned and adhered to truthful wage revelation.
Takeaway
Implement a BDM random wage draw mechanism in experimental field settings to decouple revealed reservation wages from actual assigned piece-rate pay.