Debiasing the Becker – DeGroot – Marschak valuation mechanism
de Meza, D.
& Reyniers, D. J.
(2013).
Debiasing the Becker – DeGroot – Marschak valuation mechanism.
Economics Bulletin,
33(2), 1446-1456.
& Reyniers, D. J.
(2013).
Debiasing the Becker – DeGroot – Marschak valuation mechanism.
Economics Bulletin,
33(2), 1446-1456.
This experiment finds that the Becker-DeGroot-Marschak (BDM) (1964) valuation mechanism under-predicts the proportion of subjects choosing cash over an item. The extent of the divergence is increasing in risk aversion, which is consistent with reference dependent preferences. This suggests a reframing of the BDM to improve its performance. The modified BDM mechanism is found to better match choices at a single offer price (SOP).