Putting Your Money Where Your Mouth Is

Daniel Brent, Lata Gangadharan (), Anke Leroux and Paul Raschky

No 42-16, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We present a novel approach to address differences between stated and paid choices by incentivizing stated choices in a randomized field experiment. The treatment increases the incentives in the field by making each decision financially relevant. Our results show that the treatment increases estimates of the marginal utility of income, with the effect being economically and statistically significant in aggregate. We develop a stylized model that formalizes the extent of hypothetical bias implied by our empirical results by allowing for alternative treatment-induced channels. Under a range of plausible parameter values our results indicate hypothetical bias in approximately 95% of the parameter space with a mean hypothetical bias of 60%. Heterogeneous treatment effects indicate that low income respondents are more susceptible to hypothetical bias.

Keywords: field experiment; quasi-public goods; non-market goods; stated preference; hypothetical bias (search for similar items in EconPapers)
JEL-codes: C93 Q51 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2016-11
New Economics Papers: this item is included in nep-exp and nep-upt
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Working Paper: Putting Your Money Where Your Month Is (2016)
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