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Do People Always Pay Less Than They Say? Testbed Laboratory Experiments with IV and HG Values

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  • NICOLAS JACQUEMET
  • ROBERT‐VINCENT JOULE
  • STÉPHANE LUCHINI
  • JASON F. SHOGREN

Abstract

Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies—people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both induced (IV) and homegrown (HG) values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an IV, private good context and (ii) persists in HG values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation.” In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 13 (2011)
Issue (Month): 5 (October)
Pages: 857-882

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Handle: RePEc:bla:jpbect:v:13:y:2011:i:5:p:857-882

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References

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  1. Todd Cherry & Peter Frykblom & Jason Shogren & John List & Melonie Sullivan, 2004. "Laboratory Testbeds and Non-Market Valuation: The Case of Bidding Behavior in a Second-Price Auction with an Outside Option," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 285-294, November.
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Citations

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Cited by:
  1. Eriksson, Stefan & Johansson, Per & Langenskiöld, Sophie, 2012. "What is the right profile for getting a job? A stated choice experiment of the recruitment process," Working Paper Series 2012:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  2. Stephane Luchini & Verity Watson, 2008. "Does respondent uncertainty explain framing effects in double bounded contingent valuation?," Working Papers halshs-00285861, HAL.
  3. repec:hal:journl:halshs-00584247 is not listed on IDEAS
  4. Charles R. Plott & Jean-Louis Rullière & Marie-Claire Villeval, 2011. "Introduction to the special issue Special issue on Behavioral Public Economics," Post-Print halshs-00661261, HAL.
  5. Nicolas Jacquemet & Robert-Vincent Joule & Stéphane Luchini & Jason F. Shogren, 2009. "Preference Elicitation under Oath," Documents de travail du Centre d'Economie de la Sorbonne 09043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  6. repec:hal:cesptp:halshs-00584247 is not listed on IDEAS
  7. Nicolas Jacquemet & Alexander G. James & Stéphane Luchini & Jason F. Shogren, 2010. "Social psychology and environmental economics : a new look at ex ante corrections of biased preference evaluation," Documents de travail du Centre d'Economie de la Sorbonne 10016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  8. repec:hal:wpaper:halshs-00490448 is not listed on IDEAS
  9. Stachtiaris, Spiros & Drichoutis, Andreas & Nayga, Rodolfo & Klonaris, Stathis, 2011. "Can religious priming induce truthful preference revelation?," MPRA Paper 34433, University Library of Munich, Germany.

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