Hypothetical bias for private goods: does cheap talk make a difference?

Maurice Doyon, Laure Saulais, Bernard Ruffieux and Denise Bweli
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Maurice Doyon: ULaval - Université Laval [Québec]
Bernard Ruffieux: GAEL - Laboratoire d'Economie Appliquée = Grenoble Applied Economics Laboratory - UPMF - Université Pierre Mendès France - Grenoble 2 - INRA - Institut National de la Recherche Agronomique, Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology
Denise Bweli: Egg Farmers of Canada

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Abstract: Economists and market researchers often need to accurately gauge consumers' willingness-to-pay for private goods. The experimental literature has identified a problem of hypothetical bias when using stated preferences techniques, such as open-ended questions. It has been suggested that using a cheap talk script has the potential to resolve this bias. Yet, few empirical studies on the efficiency of cheap talk for private goods exist. This study uses a between-subjects experimental design to compare consumers' willingness-to-pay for DHA-enriched milk using three elicitation methods: 1) Hypothetical open-ended stated preference question, without monetary consequence for the respondent; 2) Idem to the first with the addition of a cheap talk script; and 3) A Vickrey auction with real monetary consequences. In this experiment subjects have the choice to participate, or not, at each period. Our results indicate a significant hypothetical bias. While the use of cheap talk has no impact on this bias, it does however increase the level of participation to the market.

Keywords: cheap talk; hypothetical bias; willingness to pay; experimental economics (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dcm, nep-exp, nep-mkt and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-01254936v1
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Citations: View citations in EconPapers (8)

Published in Theoretical Economics Letters, 2015, 5 (6), pp.749-756. ⟨10.4236/tel.2015.56087⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01254936

DOI: 10.4236/tel.2015.56087

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