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Comparing the Conventional Stated Preference Valuation Technique with a Prediction Approach

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  • Yadav, Lava
  • van Rensburg, Tom M.
  • Kelley, Hugh

Abstract

Stated preference techniques have been used to place values on public goods by directly asking individuals to provide their personal values and opinions. This method has consistently resulted in the emergence of hypothetical bias. Several insights from the psychology literature suggest that social desirability bias, a contributor to hypothetical bias, occurs when individuals face such direct questions. However, replacing the direct questions with an indirect one that asks for their predictions about other’s values can potentially eliminate this bias. In this study we employ both questioning formats in a choice experiment to make comparisons between the stated responses. Predicted willingness to pay is 2.5 and 3.1 times smaller than hypothetical values indicating predictions to be a more accurate measure of actual values. The study further highlights the vulnerability of the conventional approach to a social desirability bias as it allows normative motives to distort respondents’ decisions, which in turn generates preferences for environmental attributes that are misleading.

Suggested Citation

  • Yadav, Lava & van Rensburg, Tom M. & Kelley, Hugh, 2010. "Comparing the Conventional Stated Preference Valuation Technique with a Prediction Approach," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91728, Agricultural Economics Society.
  • Handle: RePEc:ags:aesc10:91728
    DOI: 10.22004/ag.econ.91728
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    References listed on IDEAS

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    1. Miniard, Paul W & Cohen, Joel B, 1983. "Modeling Personal and Normative Influences on Behavior," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(2), pages 169-180, September.
    2. Johansson-Stenman, Olof & Martinsson, Peter, 2006. "Honestly, why are you driving a BMW?," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 129-146, June.
    3. Van Boven, Leaf & Loewenstein, George & Dunning, David, 2005. "The illusion of courage in social predictions: Underestimating the impact of fear of embarrassment on other people," Organizational Behavior and Human Decision Processes, Elsevier, vol. 96(2), pages 130-141, March.
    4. Johansson-Stenman, Olof & Svedsäter, Henrik, 2007. "Hypothetical bias in choice experiments: Within versus between subject tests," Working Papers in Economics 252, University of Gothenburg, Department of Economics.
    5. Brown, Thomas C. & Ajzen, Icek & Hrubes, Daniel, 2003. "Further tests of entreaties to avoid hypothetical bias in referendum contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 353-361, September.
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    Cited by:

    1. Guignet, Dennis, 2012. "The impacts of pollution and exposure pathways on home values: A stated preference analysis," Ecological Economics, Elsevier, vol. 82(C), pages 53-63.

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