Anchoring Effect in Context of a Familiar Good: A Case Study of Irrigation Water Supply in Rural India

Durba Biswas

Bangladesh Development Studies, 2015, vol. 38, issue 4, 91-98

Abstract: Literature shows that the presence of anchoring effect invalidates contingent valuation results. However, studies from developing countries have not addressed this phenomenon adequately. In this paper, indication of anchoring effect was tested using results from a contingent valuation exercise for a familiar good – canal irrigation water used by farmers – in a rural region of India. A single bound dichotomous choice question was followed up by a final open-ended question about the respondents’ maximum willingness to pay for improved water supply. Anchoring effect was not detected which is consistent with the argument that familiarity reduces anchoring. Furthermore, validity tested through a scope insensitivity test shows that the estimated economic values are valid.

Keywords: Irrigation Water; Contingent Valuation; Anchoring Effect; Construct Validity; Developing Country (search for similar items in EconPapers)
JEL-codes: Q25 Q51 (search for similar items in EconPapers)
Date: 2015
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