Chapter 102 The Becker–DeGroot–Marschak Mechanism is not Generally Incentive-Compatible in Practice

Experimentalists have been so sure of the incentive compatibility of this mechanism in practice that they often explicitly inform their subjects that it is in the respondents' interest to report their true reservation prices, or words to that effect. However, as is reported here, it turns out that behavior is not fully determined by these incentives alone and that, contrary to the incentives provided, the choice of upper bound of the buyout price range tends to influence the seller prices that subjects state. Thus, studies which have used upper bounds clearly exceeding what real buyers could consider paying may have produced biased estimates of seller reservation prices.