Title

The Effects of Selling Complements and Substitutes on Consumer Willingness to Pay: Evidence from a Laboratory Experiment

Document Type

Article

Publication Date

5-5-2008

Abstract

Basic economic theory predicts that a consumer's willingness to pay for a good is affected by the availability of complements and substitutes. In an auction setting, this theory implies that the presence of complements would increase bid prices for a good, while the presence of substitutes would decrease bid prices for a good. We designed an experiment that allows the calculation of inverse elasticities, the inverse-demand equivalent of conventional price elasticities. Our results show that the availability of complements and substitutes affects bids in the expected directions. This finding has important implications for researchers who design experimental auctions.

Journal

Canadian Journal of Agricultural Economics

Volume

56

Issue

2

First Page

179

Last Page

194