Do you watch movies? Have you ever come across a distressed protagonist, up against the hammer of an auctioneer? No, Thor was not the auctioneer here. But let your imaginations fly.
As part of a course on quantitative marketing research, we conducted an auction. The auction was mainly held to measure willingness to pay, or WTP.
Now, let me bombard you with some theory. It will take just two minutes of reading and absorption, I promise.
Simply put, WTP is the maximum amount you are willing to pay for a product or service. As you may have guessed, however, this isn’t very easy to measure. One of the ways we go about calculating the WTP is the second price auction.
Now, what is second price auction? I can go on, right? With the football season around, I can get some extra time.
A Vickrey auction (yep, second price auction has a fancy nickname) is a type of sealed-bid auction. Auctioneers submit written bids without knowing what the others put down. This is where it gets interesting. The highest bidder may win but they pay what the second highest bidder submitted.
Fun fact. Alright, it’s just a fact: William Spencer Vickrey won the Nobel prize in economics in 1996.
Now, coming back to the auction we conducted as part of our MOOC. How did we do it? How many participants were there? What was auctioned off? Was money involved? If yes, how much? Who won the bid? Did the exercise truly reflect the WTP of the participants? And, most importantly, was Thor a part of the whole exercise?
For insights on what we did (and much more), join Professor Prithwiraj Mukherjee and me on IIMBx’s latest course on quantitative marketing research.
Watch this space for the release date and other developments. In the meantime, let’s hope for the best for Uruguay, since its flag is eerily similar to that of Argentina.
[This post was written by Mayurakshi Chakraborty, Pedagogical Research Associate at IIMBx]