Development Lunch
12:15 p.m. – 1:15 p.m. CT
Kellogg Global Hub, 2211 Campus Drive Evanston, IL 60208 Room #L301
Licensed to Deal: A Lab in the Field Experiment with Auctioned Business Opportunities by speaker Nicolo Tomaelli
When markets are missing, consumers are denied market access and potential profits are lost. Through a lab-in-the-field experiment, we create a licensing system in which private agents bid for permission to participate in new markets, which take the form of agricultural input fairs. We use auctions to measure the willingness to pay (WTP) of agricultural input dealers to purchase the licenses. Our experiment varies the bidding mechanism, the license information held by bidders, and the pricing rule. The results suggest that open and closed mechanisms work differently in this context and that bidders' prior knowledge of the potential market is correlated with WTP. Finally, consistent with the literature, we provide evidence that hypothetical bids inflate WTP many times more than actual bids.