NPR Colleague

Maybe they want to impress you with how much they would be willing to pay. Or maybe they want to show off that they're a hard bargainer. And so they name something low. And so you worry that if you just ask them that you might not get the real response.

The experiment was actually about the parents' willingness to pay for educational and health goods for their kids.

As a result of that concern, a sort of more credible or commonly used way of doing it is to use this method called the Becker-DeGroote-Marshak or BDM method.

Yeah, so the key here is that this gives you the incentive to tell your true willingness to pay for the products.

They'd let us into their homes, you know, give us some place to sit. And then we'd say, OK, and now we're interested in selling you some goods for your kids.

OK, so like I have some random number generator that will generate a price between, say, you know, in the range of the relevant prices.

I ask you to tell me how much you value the good or in particular how much you would be willing to pay for it.

That's the only way that you can guarantee that you will get to buy it in the cases that you would want to buy it and not buy it in the cases that you don't.

They found a way to give you the incentives to exactly tell your exact willingness to pay.

82 cents. I'm just going to let the number come to me.

And probably waffles least. Least biscuits and gravy.

Farm fresh eggs, maybe. Eight, nine dollars?