Skip to main content

Willingness to Pay - Short Note on TIOLI and BDM

“How much are you willing to pay for this product?”

It is one of the most interesting and fundamental questions asked by researchers in economics. In a field setting, there are a few ways to elicit the answer to this; the two most popular ones being; ‘take it or leave it’ (TIOLI) and ‘Becker-DeGroot-Marschak’ (BDM). Right now, quite a few projects at CMF are using one of these two mechanisms or modified versions of the same, so I thought it’d be interesting for fellow CMF RAs to understand the core difference between TIOLI and BDM.

To put it simply, in TIOLI, the respondent is asked if he/she is willing to buy `XYZ’ for a randomly generated offer price. In BDM, on the other hand, the respondent is asked about his/her willingness to pay for `XYZ’ against a randomly generated offer price which is revealed later.

Let me digress with the help of an example, in TIOLI, say INR 200 is the randomly generated offer price for a respondent. The researcher would then ask that respondent if he/she is willing to buy `XYZ’ for INR 200 and if the answer is `yes’, that respondent’s willingness to pay is noted as INR 200 and the he/she can then buy the product at the said price of INR 200. Under BDM, a respondent is asked about his willingness to pay for ‘XYZ’. If he/she answers INR 200, the researcher looks at the randomly generated offer price for that respondent. If his/her willingness to pay is greater than the random offer price, the respondent gets the chance to buy the product at the randomly generated offer price.

Obviously, what I described above is just the basic difference between the two mechanisms. For further reading and application, you can read: 

“Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana” (2012) – James Berry, Greg Fischer, Raymond Guiteras

“Testing Distributional Dependence in the Becker-DeGroot-Marschak Mechanism” (2011) – Michael Urbancic


Popular Posts

Vocationalisation of education in India: Current Scenario, Key Challenges and New directions

“Every handicraft has to be taught not merely mechanically as is done today, but scientifically. This is to say, the child should learn the why and wherefore of every process.” - Gandhi’s Philosophy of Education

The greatest challenge in Indian education system today is to provide skill based education to the youth. This is exacerbated by a mismatch in demand and supply for the skilled workforce. The penetration of vocational education and training remains poor not only in rural areas, but also in urban regions where there is a higher installed capacity to impart the same. This post is an attempt to make the readers understand the need of vocational education in India. Also, this is an attempt to summarise a few recommendations on the same. 
A recent survey (61st round) conducted by the NSSO found that:

1. The percentage of population that completed primary education was 70%, but less than 10% went on to complete a graduation course and above. Almost 97% of individuals in the age bracket…

Rockstar of Financial Inclusion: Business Correspondent Model of India

About Author:  Jatinder Handoo is a social business enthusiast and a branchless banking practitioner. Currently works at FINO PayTech Ltd and is based out of Mumbai. He is reachable at
India is a hot bed of financial exclusion. A country which houses nearly 16% of the global population  has more than 65% of its people outside the formal financial system (Global Findex 2012). The Indian banking system has adopted multiple approaches to make universal financial inclusion a reality right from early days Indian post-independence banking system. Be it bank nationalization in 1969 or formation of Regional Rural Banks. Formation of NABARD or fostering microfinance through Bank-SHG linkage programme in early 90’s. A shimmering ray hope was rekindled with the growth of JLG based microfinance, however later studies made it clear that the model is credit led, concentrated predominately in the southern region of India thus could not be seen as painting complete financial…

A Platform for Knowledge - Enabling people to learn ..

I received a rather interesting link/website via my email today. The link read as MR University and all I could think of was, "Ok, this must be another website portal of some university or college". Well, on clicking the link and looking through the contents of the site, I was pleasantly surprised. The site is an online education portal or platform that allows users or teachers to upload short videos on topics or lessons they wish to impart. First topic that I come across is Development Economics.
The intent of the website is eloquently put out by the two economists, Tyler Cowen and Alex Tabarrok in the intro video. What started as a blog focusing on economics and its various implications in understanding why things are the way they are around us, has now an interesting addition. A video portal titled MRUniversity or Marginal Revolution University that focuses on online education with subjects pertaining to economics. It brought back to my mind,…