WILLINGNESS TO PAY VERSUS EXPECTED CONSUMPTION VALUE IN VICKREY AUCTIONS FOR NEW EXPERIENCE GOODS
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Vickrey auctions are commonly used to elicit willingness to pay for new food products. This paper shows that in a multi-period context, it can be optimal to bid higher than the expected consumption value for new experience goods to obtain information about the quality of the goods. The degree of value uncertainty, the purchasing frequency, and expected future market prices affect both the expected value of the quality information and the weakly dominant bidding strategy in Vickrey auctions for new experience goods.
Keywords: experience goods, value of information, Vickrey auctions.