Mitigating Hypothetical Bias: Evidence on the Effects of Correctives from a Large Field Study

Mark Andor, Manuel Frondel and Colin Vance

Environmental & Resource Economics, 2017, vol. 68, issue 3, No 15, 777-796

Abstract: Abstract The overestimation of willingness-to-pay (WTP) in hypothetical responses is a well-known finding in the literature. Various techniques have been proposed to remove or, at least, reduce this bias. Using about 30,000 responses on WTP for a variety of power mixes from a panel of 6500 German households and the fixed-effects estimator to control for unobserved heterogeneity, this article simultaneously explores the effects of two common ex-ante approaches—cheap talk and consequential script—and the ex-post certainty approach to calibrating hypothetical WTP responses. Based on a switching regression model that accounts for the potential endogeneity of respondent certainty, we find evidence for a lower WTP among those respondents who classify themselves as definitely certain about their answers. Although neither cheap talk nor the consequential-script corrective reduce WTP estimates, receiving either of these scripts increases the probability that respondents indicate definite certainty about their WTP bids.

Keywords: Willingness-to-pay; Cheap talk; Certainty approach (search for similar items in EconPapers)
JEL-codes: D12 Q21 Q41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s10640-016-0047-x

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