Should We Trust Hypothetical Referenda? Test and Identification Problems

Fredrik Carlsson () and Olof Johansson-Stenman ()

No 189, Working Papers in Economics from Göteborg University, Department of Economics

Abstract: In a paper published in the Journal of Political Economy, Cummings et al. experimentally compare hypothetical and real-money referenda. They reject the incentive compatibility hypothesis of hypothetical referenda. However, in a comment, Haab et al. claim that the hypothesis cannot be rejected if one corrects for heteroskedasticity. In this note we show that the methodology used by Haab et al. is flawed, and their conclusions unwarranted. Our results rather support the original conclusion that hypothetical referenda appears not to resemble real referenda (unless one has reasons to believe that the true variance is much larger in the hypothetical case). This paper outlines design and identification difficulties arising when statistically comparing real and hypothetical referenda.

Keywords: Hypothetical referenda; incentive compatibility; non-market valuation; identification (search for similar items in EconPapers)
JEL-codes: C12 C35 Q51 (search for similar items in EconPapers)
Date: 2006-01-19, Revised 2006-01-24
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