Multiple equilibria with a multiple price list

Abstract

A multiple price list is useful for eliciting a Willingness-to-Pay (WTP) and a possible Lower Limit (LL) under which the demand is zero. This multiple price list implies an aggregate demand determined by the number of participants whose WTP is greater than the market price and whose LL is below this market price. From a survey focusing on meat demand, we show that this aggregate demand leads to multiple price equilibria.

Keywords:

• survey
• Willingness-to-Pay
• multiple equilibria

JEL Classification:

• D82
• C91

Acknowledgements

This study was initiated by the French Technological Network Florepro (Bioprotective Cultures for Preserving Food Products). It received financial support from The ACTIA (Technical Coordination Association for the Food and Agriculture Industry).

Notes

¹As a meta-analysis performed by Murphy et al. (2005) finds a median upward bias of 35% only for WTP with public goods, we could decrease all our estimated values of WTP by 35% even if ground beef is a private good. With such a decrease, the result of this article underlining multiple equilibria would be invariant, even if the equilibrium prices would be different compared to those of Fig. 2.

² The main advantages of the multiple price list are both transparency and simplicity of the mechanism. The two disadvantages are the interval response that elicits intervals rather than point estimates for WTP and the framing effect with a psychological bias towards the middle of the multiple price list (Andersen et al., 2007).