The Usefulness of Experimental Auctions in Determining Consumers' Willingness-to-Pay for Quality-Differentiated Products

The validity and effectiveness of using experimental auctions to elicit consumers' willingness‐to‐pay for closely related, quality‐differentiated products is examined. The effect of panelists' demographics on bid values and auction winners, and the impact of experimental procedures on auction prices are analyzed. Demographic variables are poor predictors of bids and auction winners. Experimental procedures such as panel size and initial endowment influence market price level. Relative bid differences for paired samples are primarily influenced by relative differences in taste panel ratings. Relative willingness‐to‐pay values elicited through experimental auctions appear valid, while actual willingness‐to‐pay values are influenced by experimental design.