IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v10y2003i12p737-740.html
   My bibliography  Save this article

Validity of Willingness to Pay: hypothetical versus actual payment

Author

Listed:
  • M. R. Bhatia
  • J. A. Fox-Rushby

Abstract

Questions concerning the criterion validity of contingent valuation studies have been raised for years. However, the few examples that exist concentrate on willingness to pay (WTP) for goods like chocolate bars, where a market exists. This article examines the criterion validity of WTP for treated mosquito nets (TMNs) in Gujarat, India. Three hundred households, in 20 villages, were interviewed twice within one month. The first interview ascertained maximum hypothetical WTP for one TMN using a bidding format with an open-ended final question, along with questions about the socio-economic and health factors that were likely to influence demand. The second interview reminded the respondents about TMNs and asked whether they would be willing to buy one for Rs75 (the modal value). If so, they were invited to buy as many TMNs as desired for their household. Analysis is based on a 2 × 2 contingency table with estimates of the sensitivity and specificity of the hypothetical WTP. At an aggregate level, there is no discrepancy between hypothetical and observed WTP, although there was considerable variation amongst individuals. Sensitivity was 62% and specificity 67%. It is concluded that these WTP estimates are robust at the population level but less so at the individual level. Further research is required to examine the determinants of change in household behaviour between hypothetical and actual WTP.

Suggested Citation

  • M. R. Bhatia & J. A. Fox-Rushby, 2003. "Validity of Willingness to Pay: hypothetical versus actual payment," Applied Economics Letters, Taylor & Francis Journals, vol. 10(12), pages 737-740.
  • Handle: RePEc:taf:apeclt:v:10:y:2003:i:12:p:737-740
    DOI: 10.1080/1350485032000129575
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/1350485032000129575&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/1350485032000129575?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kalle Seip & Jon Strand, 1992. "Willingness to pay for environmental goods in Norway: A contingent valuation study with real payment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(1), pages 91-106, January.
    2. Pei-Ing Wu & Chu-Li Huang, 2001. "Actual averting expenditure versus stated willingness to pay," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 277-283.
    3. Magnus Johannesson, 1993. "The Contingent-valuation Method," Medical Decision Making, , vol. 13(4), pages 311-312, December.
    4. Helen R. Neill & Ronald G. Cummings & Philip T. Ganderton & Glenn W. Harrison & Thomas McGuckin, 1994. "Hypothetical Surveys and Real Economic Commitments," Land Economics, University of Wisconsin Press, vol. 70(2), pages 145-154.
    5. Cummings, Ronald G & Harrison, Glenn W & Rutstrom, E Elisabet, 1995. "Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-Compatible?," American Economic Review, American Economic Association, vol. 85(1), pages 260-266, March.
    6. Massimo Paradiso & Antonella Trisorio, 2001. "The effect of knowledge on the disparity between hypothetical and real willingness to pay," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1359-1364.
    7. John Loomis & Cynthia Pierce & Mike Manfredo, 2000. "Using the demand for hunting licences to evaluate contingent valuation estimates of willingness to pay," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 435-438.
    8. Krabbe, Paul F. M. & Essink-Bot, Marie-Louise & Bonsel, Gouke J., 1997. "The comparability and reliability of five health-state valuation methods," Social Science & Medicine, Elsevier, vol. 45(11), pages 1641-1652, December.
    9. Bohm, Peter, 1972. "Estimating demand for public goods: An experiment," European Economic Review, Elsevier, vol. 3(2), pages 111-130.
    10. John Loomis & Thomas Brown & Beatrice Lucero & George Peterson, 1997. "Evaluating the Validity of the Dichotomous Choice Question Format in Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(2), pages 109-123, September.
    11. Bishop, Richard C. & Heberlein, Thomas A., 1979. "Measuring Values Of Extramarket Goods: Are Indirect Measures Biased?," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 277818, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Peter Bohm, 1972. "Estimating the demand for public goods: An experiment," Framed Field Experiments 00126, The Field Experiments Website.
    13. Gregory Poe & Jeremy Clark & Daniel Rondeau & William Schulze, 2002. "Provision Point Mechanisms and Field Validity Tests of Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(1), pages 105-131, September.
    14. Klose, Thomas, 1999. "The contingent valuation method in health care," Health Policy, Elsevier, vol. 47(2), pages 97-123, May.
    15. Magnus Johannesson & Bengt Liljas & Richard O'Conor, 1997. "Hypothetical versus real willingness to pay: some experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 4(3), pages 149-151.
    16. Magnus Johannesson, 1997. "Some further experimental results on hypothetical versus real willingness to pay," Applied Economics Letters, Taylor & Francis Journals, vol. 4(8), pages 535-536.
    17. Richard C. Bishop & Thomas A. Heberlein, 1979. "Measuring Values of Extramarket Goods: Are Indirect Measures Biased?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(5), pages 926-930.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joan Costa-Font & Joan Rovira, 2005. "Eliciting preferences for collectively financed health programmes: the 'willingness to assign' approach," Applied Economics, Taylor & Francis Journals, vol. 37(14), pages 1571-1583.
    2. Spash, Clive L., 2008. "The Contingent Valuation Method: Retrospect and Prospect," MPRA Paper 101234, University Library of Munich, Germany.
    3. Kanya, Lucy & Sanghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: A systematic review and meta-analysis of the evidence," Social Science & Medicine, Elsevier, vol. 232(C), pages 238-261.
    4. Kanya, Lucy & Saghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: a systematic review and meta-analysis of the evidence," LSE Research Online Documents on Economics 100741, London School of Economics and Political Science, LSE Library.
    5. repec:ebl:ecbull:v:3:y:2004:i:6:p:1-13 is not listed on IDEAS
    6. Jacopo Bonan & Philippe LeMay-Boucher & Michel Tenikue, 2014. "Households' Willingness to Pay for Health Microinsurance and its Impact on Actual Take-up: Results from a Field Experiment in Senegal," Journal of Development Studies, Taylor & Francis Journals, vol. 50(10), pages 1445-1462, November.
    7. M. R. Bhatia, 2005. "From evidence to calibration for starting point bias: willingness to pay for treated mosquito nets in Gujarat, India," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 1-7.
    8. Joseph Little & Robert Berrens, 2004. "Explaining Disparities between Actual and Hypothetical Stated Values: Further Investigation Using Meta-Analysis," Economics Bulletin, AccessEcon, vol. 3(6), pages 1-13.
    9. Mandy Ryan & Emmanouil Mentzakis & Suthi Jareinpituk & John Cairns, 2017. "External Validity of Contingent Valuation: Comparing Hypothetical and Actual Payments," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1467-1473, November.
    10. Shiell, Alan & Sperber, Daniel & Porat, Carly, 2009. "Do taboo trade-offs explain the difficulty in valuing health and social interventions?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(6), pages 935-939, December.
    11. Murat Isik, 2006. "An experimental analysis of impacts of uncertainty and irreversibility on willingness-to-pay," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 67-72.
    12. Pallab Mozumder & Robert P. Berrens, 2007. "Investigating hypothetical bias: induced-value tests of the referendum voting mechanism with uncertainty," Applied Economics Letters, Taylor & Francis Journals, vol. 14(10), pages 705-709.
    13. Stirling Bryan & Sue Jowett, 2010. "Hypothetical versus real preferences: results from an opportunistic field experiment," Health Economics, John Wiley & Sons, Ltd., vol. 19(12), pages 1502-1509, December.
    14. Bobinac, Ana & van Exel, N. Job A. & Rutten, Frans F.H. & Brouwer, Werner B.F., 2012. "GET MORE, PAY MORE? An elaborate test of construct validity of willingness to pay per QALY estimates obtained through contingent valuation," Journal of Health Economics, Elsevier, vol. 31(1), pages 158-168.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, March.
    2. Kanya, Lucy & Saghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: a systematic review and meta-analysis of the evidence," LSE Research Online Documents on Economics 100741, London School of Economics and Political Science, LSE Library.
    3. Kanya, Lucy & Sanghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: A systematic review and meta-analysis of the evidence," Social Science & Medicine, Elsevier, vol. 232(C), pages 238-261.
    4. Murphy, James J. & Stevens, Thomas H., 2004. "Contingent Valuation, Hypothetical Bias, and Experimental Economics," Agricultural and Resource Economics Review, Cambridge University Press, vol. 33(2), pages 182-192, October.
    5. Svensson, Mikael, 2006. "The Value of a Statistical Life in Sweden Estimates from Two Studies using the "Certainty Approach" Calibration," Working Papers 2006:6, Örebro University, School of Business, revised 12 May 2009.
    6. List, John A. & Shogren, Jason F., 2002. "Calibration of Willingness-to-Accept," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 219-233, March.
    7. Liljas, Bengt & Blumenschein, Karen, 2000. "On hypothetical bias and calibration in cost-benefit studies," Health Policy, Elsevier, vol. 52(1), pages 53-70, May.
    8. John K. Horowitz & Kenneth E. McConnell & James J. Murphy, 2013. "Behavioral foundations of environmental economics and valuation," Chapters, in: John A. List & Michael K. Price (ed.), Handbook on Experimental Economics and the Environment, chapter 4, pages 115-156, Edward Elgar Publishing.
    9. Vivien Foster & Ian J. Bateman & David Harley, 1998. "Real and hypothetical willingness to pay for environmental preservation: a non-experimental comparison," Chapters, in: Melinda Acutt & Pamela Mason (ed.), Environmental Valuation, Economic Policy and Sustainability, chapter 3, pages 35-50, Edward Elgar Publishing.
    10. John List & Craig Gallet, 2001. "What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(3), pages 241-254, November.
    11. Shogren, Jason F., 2006. "Experimental Methods and Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 19, pages 969-1027, Elsevier.
    12. Carina Cavalcanti & Andreas Leibbrandt, 2017. "A glance into the willingness to reduce overfishing: Field evidence from a fishnet exchange program," Monash Economics Working Papers 09-17, Monash University, Department of Economics.
    13. Richard O‘Conor & Magnus Johannesson & Per-Olov Johansson, 1999. "Stated Preferences, Real Behaviour and Anchoring: Some Empirical Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(2), pages 235-248, March.
    14. W. Michael Hanemann, 1994. "Valuing the Environment through Contingent Valuation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 19-43, Fall.
    15. Jie He & Jérôme Dupras & Thomas G. Poder, 2018. "Payment and Provision Consequentiality in Voluntary Contribution Mechanism: Single or Double “Knife-Edge” Evidence?," Cahiers de recherche 18-02, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    16. List, John A. & Shogren, Jason F., 1998. "Calibration of the difference between actual and hypothetical valuations in a field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 193-205, October.
    17. Daniel McFadden, 2009. "The human side of mechanism design: a tribute to Leo Hurwicz and Jean-Jacque Laffont," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 77-100, April.
    18. Lopez-Becerra, E.I. & Alcon, F., 2021. "Social desirability bias in the environmental economic valuation: An inferred valuation approach," Ecological Economics, Elsevier, vol. 184(C).
    19. Isacsson, Gunnar, 2007. "The trade off between time and money: Is there a difference between real and hypothetical choices?," Working Papers 2007:3, Swedish National Road & Transport Research Institute (VTI).
    20. Gubanova, Tatiana & Adamowicz, Wiktor L. & McMillan, Melville, 2009. "'Pocket and Pot': Hypothetical Bias in a No-Free-Riding Public Contribution Game," Staff Paper Series 91403, University of Alberta, Department of Resource Economics and Environmental Sociology.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:10:y:2003:i:12:p:737-740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.