Difficulties in valuing street light improvement: trust, surprise and bound effects

Neil Powe, Kenneth Willis and Guy Garrod

Applied Economics, 2006, vol. 38, issue 4, 371-381

Abstract: Previous empirical research has demonstrated an internal inconsistency that may occur in response strategies between the first and second valuations made to closed-ended contingent valuation questions. One possible explanation for this bound effect is the surprise of being asked the second valuation question, which may be enhanced where there is a lack of trust. This paper considers the use of closed-ended contingent valuation to estimate non-market benefits for an improved street lighting scheme where there is a lack of trust in the agency responsible for provision. The results provide confirmation that surprise is an important determinant of bound effects; however, efforts to reduce such bias using a prior statement of the bid range were found to be ineffective in increasing trust and reducing surprise. Given the importance of this area of research, directions for future research are considered.

Date: 2006
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DOI: 10.1080/00036840500369274

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