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Hypothetical Bias In Dichotomous Choice Contingent Valuation Studies

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  • Ash, Michael
  • Murphy, James J.
  • Stevens, Thomas H.

Abstract

This paper uses a meta-analysis to explore the relationship between hypothetical bias and the price respondents are asked to pay. For public goods, the results clearly indicate a difference in the price elasticity between hypothetical and actual payment conditions. Since the bias increases for larger dollar amounts, any simple guidelines, such as NOAA's "divide by two" rule of thumb, could be misleading. Future attempts to calibrate contingent valuation responses should reflect this price sensitivity.

Suggested Citation

  • Ash, Michael & Murphy, James J. & Stevens, Thomas H., 2004. "Hypothetical Bias In Dichotomous Choice Contingent Valuation Studies," Working Paper Series 14506, University of Massachusetts, Amherst, Department of Resource Economics.
    • Handle: RePEc:ags:umamwp:14506
    DOI: 10.22004/ag.econ.14506
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    References listed on IDEAS

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    1. Richard A. Hofler & John A. List, 2004. "Valuation on the Frontier: Calibrating Actual and Hypothetical Statements of Value," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 213-221.
    2. 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.
    3. Laura O. Taylor & Ronald G. Cummings, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June.
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    5. 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.
    6. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    7. Bohm, Peter, 1984. "Revealing demand for an actual public good," Journal of Public Economics, Elsevier, vol. 24(2), pages 135-151, July.
    8. 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.
    9. Blumenschein, Karen & Johannesson, Magnus & Yokoyama, Krista K. & Freeman, Patricia R., 2001. "Hypothetical versus real willingness to pay in the health care sector: results from a field experiment," Journal of Health Economics, Elsevier, vol. 20(3), pages 441-457, May.
    10. Peter Bohm, 1984. "Revealing demand for an actual public good," Framed Field Experiments 00129, The Field Experiments Website.
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    Cited by:

    1. Dominique Ami & Frédéric Aprahamian & Olivier Chanel & Stéphane Luchini, 2011. "A Test of Cheap Talk in Different Hypothetical Contexts: The Case of Air Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(1), pages 111-130, September.
    2. Fortin, Corey & Goodwin, Harold L., Jr., 2008. "Valuation of Temp-Time's Fresh-Check® Indicator on Perishable Food Products in Belgium," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6766, Southern Agricultural Economics Association.
    3. Michael Farmer & Clifford Lipscomb, 2008. "Conservative dichotomous choice responses in the active policy setting: DC rejections below WTP," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(3), pages 223-246, March.

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