Eliciting Willingness to Pay Without Bias: Evidence from a Field Experiment* (original) (raw)
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Environmental and Resource Economics, 2009
Ex post mitigation of hypothetical bias using follow up certainty questions typically takes one of two forms: (1) two options, "definitely sure" and "probably sure", or (2) a 10point scale with 10 very certain. While both have been successful in eliminating hypothetical bias from estimates of WTP, little is known about the relationship between the two. The purpose of this paper is to compare the two using data from three field experiments. We compare four types of yes responses where the types differ in the criterion used to determine if there is sufficient certainty for a hypothetical yes response to be considered a true yes response. We make several comparisons, but focus on determining which values on the 10-point scale give the same estimates of WTP as "definitely sure" hypothetical yeses and real yeses (actual purchases.) Values that produce equivalence are near 10 on the certainty scale.
Calibrating hypothetical willingness to pay responses
Journal of Risk and Uncertainty, 1999
Experimental data comparing hypothetical and real dichotomous choice responses for two different goods were used to estimate a statistical bias function to calibrate the hypothetical yes responses. The probability that a hypothetical yes response would be a real yes response was estimated as a function of Ž . the individual's self-assessed certainty of the hypothetical yes response assessed on a 0᎐10 scale and a variable representing the price level. Without calibration the hypothetical yes responses significantly exceeded the proportion of real yes responses, but after calibration the null hypothesis of no difference between hypothetical and real responses could not be rejected in any of the experiments.
Applied Economics Letters, 2002
This study reports the results of experiments designed to elicit, within a controlled laboratory environment, hypothetical and real willingness to pay for an environmental educational program using the open-ended question format. By maintaining both the good and the question format constant across the treatments, our experiments overcome the shortcomings of recently reported experimental results, providing a clean test for hypothetical bias in open-ended valuations. Having found a statistically significant difference between the hypothetical and real values, we turn into the question of whether hypothetical valuations may nonetheless provide useful statistical information concerning individuals' real valuations. This question, which is perhaps the key question in the current state of the debate surrounding the contingent valuation method, is answered affirmatively in this study.
A Comparison of Approaches to Mitigate Hypothetical Bias
2009
We compare two approaches to mitigating hypothetical bias. The study design includes three treatments: an actual payment treatment, a contingent valuation (CV) treatment with a follow-up certainty question, and a CV treatment with a cheap talk script. Our results suggest that both the follow-up certainty treatment and the cheap talk treatment produce willingness-to-pay (WTP) estimates consistent with the actual payment
Augmenting short Cheap Talk scripts with a repeated Opt-Out Reminder in Choice Experiment surveys
Resource and Energy Economics, 2014
Hypothetical bias remains a major problem when valuing non-market goods with stated preference methods. Originally developed for Contingent Valuation studies, Cheap Talk has been found to effectively reduce hypothetical bias in some applications, though empirical results are ambiguous. We discuss reasons why Cheap Talk may fail to effectively remove hypothetical bias, especially in Choice Experiments. In this light, we suggest augmenting Cheap Talk in Choice Experiments with a so-called Opt-Out Reminder. Prior to each single choice set, the Opt-Out Reminder explicitly instructs respondents to choose the opt-out alternative if they find the experimentally designed alternatives too expensive. In an empirical Choice Experiment survey we find the Opt-Out Reminder to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the Cheap Talk applied without the Opt-Out Reminder. This suggests that rather than merely adopting the Cheap Talk practice directly from Contingent Valuation, it should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format. Our results further suggest that augmenting Cheap Talk with a dynamic Opt-Out Reminder can be an effective and promising improvement in the ongoing effort to remedy the particular types of hypothetical bias that potentially continue to invalidate Choice Experiment surveys.
An alternative approach for eliciting willingness-to-pay: A randomized Internet trial
2007
Open-ended methods that elicit willingness-to-pay (WTP) in terms of absolute dollars often result in high rates of questionable and highly skewed responses, insensitivity to changes in health state, and raise an ethical issue related to its association with personal income. We conducted a 2x2 randomized trial over the Internet to test 4 WTP formats: 1) WTP in dollars; 2) WTP as a percentage of financial resources; 3) WTP in terms of monthly payments; and 4) WTP as a single lump-sum amount. WTP as a percentage of financial resources generated fewer questionable values, had better distribution properties, greater sensitivity to severity of health states, and was not associated with income. WTP elicited on a monthly basis also showed promise.
Testing the Effect of a Short Cheap Talk Script in Choice Experiments
FOI Working Papers, 2010
The application of stated preference methods rests on the assumption that respondents act rationally and that their demand for the non-market good on the hypothetical market is equal to what their real demand would be. Previous studies have shown that this is not the case and this gap is known as hypothetical bias. The present paper attempts to frame the description of the hypothetical market so as to induce more "true market behaviour" in the respondents by including a short Cheap Talk script. The script informs respondents that in similar studies using stated preference methods, people have a tendency to overestimate how much they are willing to pay compared to their actual (true) willingness to pay. Applying a two-split sample approach to a Choice Experiment study focusing on preferences for reducing visual disamenities from offshore wind farms, the Cheap Talk script is found to be a preference mover, but does not affect preferences significantly. Significant effects are found when relating the effect of the Cheap Talk script to the cost levels of the alternatives, in that female respondents are found to choose higher cost alternatives less frequently when presented with the Cheap Talk script, while male respondents are not affected.
2003
Significant difference between response to real and hypothetical valuation questions is often referred to as hypothetical bias. The existence of hypothetical bias has been well documented in both experimental and field settings, but there is little consensus on how to systematically control for it. Cummings and Taylor have had success with using "cheap talk" (which entails reading a script that highlights the hypothetical bias problem before participants make any decisions) as a means of generating unbiased responses in a referendum format. In this paper, we test the robustness of cheap talk using a voluntary contribution mechanism. Our results (1) confirm the existence of hypothetical bias, but (2) suggest that the effectiveness of cheap talk appears to be quite limited.
On the Use of Honesty Priming Tasks to Mitigate Hypothetical Bias in Choice Experiments
American Journal of Agricultural Economics, 2013
We test whether the use of an honesty priming task from the social psychology literature can help mitigate hypothetical bias in stated preference choice experiments (CE). Using a between-sample design, we conducted experiments with five treatments: (1) hypothetical CE without cognitive task, (2) hypothetical CE with cheap talk script, (3) hypothetical CE with neutral priming task, (4) hypothetical CE with honesty priming task, and (5) non-hypothetical CE. Results generally suggest that marginal willingness to pay estimates from treatment 4 where subjects are given honesty priming task before the choice experiment are not statistically different from marginal valuations from treatment 5 where subjects are in a non-hypothetical choice experiment. Values from both these treatments are significantly lower than those from other three hypothetical treatments (treatments 1-3). Using hold out tasks, our results also suggest that one could get higher percentage of correct predictions of participants' choices in treatments 4 and 5 than in treatments 1-3 and that there is no significant difference in percentage of correct predictions between treatments 4 and 5.
Hypothetical bias, choice experiments and willingness to pay
Transportation Research Part B: Methodological, 2010
There is growing interest in establishing the extent of differences in willingness to pay (WTP) for attributes, such as travel time savings, that are derived from real market settings and hypothetical (to varying degrees) settings. Non-experiment external validity tests involving observation of choice activity in a natural environment, where the individuals do not know they are in an experiment, are rare. In contrast the majority of tests are a test of external validity between hypothetical and actual experiments. Deviation from real market evidence is referred to in the literature broadly as hypothetical bias. The challenge is to identify such bias, and to the extent to which it exists, establishing possible ways to minimise it. This paper reviews the efforts to date to identify and 'calibrate' WTP derived from one or more methods that involve assessment of hypothetical settings, be they (i) contingent valuation methods, (ii) choice experiments involving trading attributes between multiple alternatives, with or without referencing, or (iii) methods involving salient or non-salient incentives linked to actual behaviour. Despite progress in identifying possible contributions to differences in marginal WTP, there is no solid evidence, although plenty of speculation, to explain the differences between all manner of hypothetical experiments and non-experimental evidence. The absence of non-experimental evidence from natural field experiments remains a major barrier to confirmation of under or overestimation. We find, however, that the role of referencing of an experiment relative to a real experience (including evidence from revealed preference (RP) studies), in the design of choice experiments, appears to offer promise in the derivation of estimates of WTP that have a meaningful link to real market activity, closing the gap between RP and SC WTP outputs.