Advertisement

Environmental and Resource Economics

, Volume 30, Issue 3, pp 327–343 | Cite as

Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism?

  • James J. Murphy
  • Thomas Stevens
  • Darryl Weatherhead
Article

Abstract

Significant difference between response to real and hypothetical valuation questions is often referred to as hypothetical bias. Some economists have had success with using “cheap talk” (which entails reading a script that explicitly highlights the hypothetical bias problem before participants make any decisions) as a means of generating unbiased responses in a referendum format. In this article, we test the robustness of cheap talk using a voluntary contribution mechanism with a provision point over a wide range of possible payment amounts. Our results confirm the existence of hypothetical bias, and suggest that cheap talk may eliminate hypothetical bias, but only for respondents facing higher payments.

Keywords

contingent valuation experiments hypothetical bias voluntary contributions 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Aadland, D., Caplan, A.J. 2003Willingness to Pay for Curbside Recycling with Detection and Mitigation of Hypothetical BiasAmerican Journal of Agricultural Economics85492502Google Scholar
  2. Arrow, K., Solow, R., Portney, P., Leamer, E.E., Radner, R., Schuman, H. 1993Report of the NOAA Panel on Contingent ValuationFederal Register5846024614Google Scholar
  3. Berrens, R., Jenkins-Smith, H., Bohara, A., Silva, C. 2002Further Investigation of Voluntary Contribution Contingent Valuation: Fair Share, Time of Contribution, and Respondent UncertaintyJournal of Environmental Economics and Management44144168Google Scholar
  4. Brown, T.C., Ajzen, I., Hrubes, D. 2003aFurther Tests of Entreaties to Avoid Hypothetical Bias in Referendum Contingent ValuationJournal of Environmental Economics and Management46353361Google Scholar
  5. Brown, T.C., Ajzen, I., Hrubes, D. 2003bFurther Tests of Entreaties to Avoid Hypothetical Bias in Referendum Contingent ValuationJournal of Environmental Economics and Management46353361Google Scholar
  6. Champ, P.A., Bishop, R.C., Brown, T.C., McCollum, D.W. 1997Using Donation Mechanisms to Value Nonuse Benefits from Public GoodsJournal of Environmental Economics and Management33151162Google Scholar
  7. Clark, J. 2002House Money Effects in Public Good ExperimentsExperimental Economics5223231Google Scholar
  8. Cummings, R.G., Elliott, S., HarrisonG.W. Murphy, J. 1997Are Hypothetical Referenda incentive Compatible?Journal of Political Economy105609621Google Scholar
  9. Cummings, R.G., Harrison, G.W., Osborne, L.L. 1995aCan the Bias of Contingent Valuation Surveys Be Reduced? Economics working paperDivision of Research, College of Business Administration, University of South Carolina.Columbia, SCGoogle Scholar
  10. Cummings, R.G., Harrison, G.W., Rutstroüm, E.E. 1995Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-CompatibleAmerican Economic Review85260266Google Scholar
  11. Cummings, R.G., Taylor, L.O. 1999Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation MethodThe American Economic Review89649665CrossRefGoogle Scholar
  12. Ethier, R.G., Poe, G.L., Schulze, W.D., Clark, J. 2000A Comparison of Hypothetical Phone and Mail Contingent Valuation Responses for Green-Pricing Electricity ProgramsLand Economics765467Google Scholar
  13. Fox, J.A., Shogren, J.F., Hayes, D.J., Kliebenstein, J.B. 1998CVM-X: Calibrating Contingent Values with Experimental Auction MarketsAmerican Journal of Agricultural Economics80455465Google Scholar
  14. Harrison, G.W., Rutstroüm, E.E. 2002Experimental Evidence on the Existence of Hypothetical Bias in Value Elicitation MethodsSmith, V.L. eds. Handbook of Results in Experimental EconomicsElsevier ScienceNew YorkGoogle Scholar
  15. Hoehn, J.P., Randall, A. 1987A Satisfactory Benefit Cost Indicator from Contingent ValuationJournal of Environmental Economics and Management14226247Google Scholar
  16. Isaac, R.M., Schmidtz, D., Walker, J.M. 1989The Assurance Problem in a Laboratory MarketPublic Choice62217236Google Scholar
  17. Ledyard, J.O. 1995Public Goods: A Survey of Experimental ResearchKagel, J.H.Roth, A.E. eds. The Handbook of Experimental EconomicsPrinceton University PressPrinceton, NJGoogle Scholar
  18. List, J., Berrens, R.P., Bohara, A.K., Kerkvliet, J. 2004Examining the Role of Social Isolation on Stated PreferencesAmerican Economic Review94741752Google Scholar
  19. List, J.A. 2001Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for SportscardsAmerican Economic Review9114981507CrossRefGoogle Scholar
  20. List J.A. (2004). Young, Selfish and Male: Field Evidence of Social Preferences. Economic Journal 114(January): 121–149Google Scholar
  21. List, J.A., Gallet, C. 2001What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values?Environmental and Resource Economics20241254Google Scholar
  22. Lusk, J.L. 2003Willingness-to-pay for Golden RiceAmerican Journal of Agricultural Economics85840856Google Scholar
  23. Marks, M., Croson, R. 1998Alternative Rebate Rules in the Provision of a Threshold Public Good: An Experimental InvestigationJournal of Public Economics67195220Google Scholar
  24. Murphy J.J., Stevens T.H., Allen P.G., Weatherhead D., (2003). A Meta-Analysis of Hypothetical Bias in Stated Preference Valuation. Working paper. Amherst, MA: University of Massachusetts, Department of Resource EconomicsGoogle Scholar
  25. Opaluch, J.J., Segerson, K. 1989Rational Roots of Irrational Behavior, New Theories of Economic Decision-MakingNortheastern Journal of Agricultural and Resource Economics188195Google Scholar
  26. Poe, G.L., Clark, J.E., Rondeau, D., Schulze, W.D. 2002Provision Point Mechanisms and Field Validity Tests of Contingent ValuationEnvironmental and Resource Economics23105131Google Scholar
  27. Rondeau, D., Schulze, W., Poe, G. 1999Voluntary Revelation of the Demand for Public Goods Using a Provision Point MechanismJournal of Public Economics72455470Google Scholar
  28. Rose, S.K., Clark, J., Poe, G.L., Rondeau, D., Schulze, W.D. 2002The Private Provision of Public Goods: Tests of a Provision Point Mechanism for Funding Green Power ProgramsResource and Energy Economics24131155Google Scholar
  29. Taylor, L. 1998Incentive Compatible Referenda and the Valuation of Environmental GoodsAgricultural and Resource Economics Review27132139Google Scholar

Copyright information

© Springer 2005

Authors and Affiliations

  • James J. Murphy
    • 1
  • Thomas Stevens
    • 2
  • Darryl Weatherhead
    • 3
  1. 1.Department of Resource Economics, and the Center for Public Policy and AdministrationUniversity of MassachusettsAmherstUSA
  2. 2.Department of Resource EconomicsUniversity of MassachusettsAmherstUSA
  3. 3.US Environmental Protection AgencyOffice of Air Quality Planning and StandardsUSA

Personalised recommendations