Environmental and Resource Economics

, Volume 30, Issue 3, pp 313–325

A Meta-analysis of Hypothetical Bias in Stated Preference Valuation

  • James J. Murphy
  • P. Geoffrey Allen
  • Thomas H. Stevens
  • Darryl Weatherhead
Article

Abstract

Individuals are widely believed to overstate their economic valuation of a good by a factor of two or three. This paper reports the results of a meta-analysis of hypothetical bias in 28 stated preference valuation studies that report monetary willingness-to-pay and used the same mechanism for eliciting both hypothetical and actual values. The papers generated 83 observations with a median ratio of hypothetical to actual value of only 1.35, and the distribution has severe positive skewness. We find that a choice-based elicitation mechanism is important in reducing bias. We provide some evidence that the use of student subjects may be a source of bias, but since this variable is highly correlated with group experimental settings, firm conclusions cannot be drawn. There is some weak evidence that bias increases when public goods are being valued, and that some calibration methods may be effective at reducing bias. However, results are quite sensitive to model specification, which will remain a problem until a comprehensive theory of hypothetical bias is developed.

Keywords

contingent valuation experiments hypothetical bias meta-analysis stated preference 

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Copyright information

© Springer 2005

Authors and Affiliations

  • James J. Murphy
    • 1
  • P. Geoffrey Allen
    • 1
  • Thomas H. Stevens
    • 1
  • Darryl Weatherhead
    • 2
  1. 1.Department of Resource Economics and Center for Public Policy and AdministrationUniversity of MassachusettsAmherstUSA
  2. 2.U.S. Environmental Protection AgencyOffice of Air Quality Planning and StandardsUSA

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