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Accounting for the hypothetical bias: A changing adjustment factor approach

Marilena Furno (), Francesco La Barbera and Fabio Verneau

Agribusiness, 2019, vol. 35, issue 3, 329-342

Abstract: The existence of the hypothetical bias is a well‐documented issue, and several techniques have been proposed to realign stated preferences to revealed preferences demand data. Among the ex post approaches to reduce hypothetical bias, the estimation of calibration factors and calibration functions has been considered by many authors. Nevertheless, a calibration method that allows the extent of the adjustment to vary with the magnitude of stated bids has never been proposed. Therefore, in the present study, we investigate the topic of ex post approaches showing that the bias changes along the quantiles of the WTP distribution. Using data of both hypothetical and nonhypothetical experimental auction for a private and deliverable good, a calibration method that allows the extent of the adjustment to vary with the magnitude of the stated WTP is proposed.

Date: 2019
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https://doi.org/10.1002/agr.21578

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