Using Laboratory Experimental Auctions in Marketing Research: A Case Study of New Packaging for Fresh Beef

Abstract

This paper illustrates the use of laboratory experimental auctions in a pretest market research program for new products. We review the experimental auctions literature, discuss the range of auction mechanisms available and present the advantages and disadvantages of using a particular mechanism for a laboratory pretest market. We then present a step-by-step example of how a theoretically incentive compatible auction mechanism (fifth-price, sealed-bid) was used in a laboratory pretest market for vacuum-packaged beef. Based on the illustration, we discuss the potential for using laboratory experimental auctions in pretest market research. We present the limitations that may be encountered in such applications and outline research aimed at improving the behavioral properties of the technique.