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Bounded rationality in contingent valuation: Empirical evidence using cognitive psychology

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  • Frör, Oliver
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    Abstract

    Survey based valuation techniques like the Contingent Valuation Method (CVM) rely particularly on the premise of respondents' rationality when answering willingness to pay (WTP) questions. Results of CVM surveys have repeatedly put this fundamental assumption into question. This study adopts a more realistic view of rationality accounting for respondents' limited capacities to process information. Based on cognitive psychology a technique to detect and analyze the bounds of rationality inherent in WTP statements is developed. Using an empirical example, the influence of bounded rationality on the validity of CVM results is analyzed. It is shown that individual differences in information processing play a major role for the validity of CVM responses. The results allow new insights into response behavior in dichotomous-choice versus payment card elicitation formats. From the results of this study recommendations for future survey designs taking into account respondents' different information processing modes are developed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 68 (2008)
    Issue (Month): 1-2 (December)
    Pages: 570-581

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    Handle: RePEc:eee:ecolec:v:68:y:2008:i:1-2:p:570-581

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    Web page: http://www.elsevier.com/locate/ecolecon

    Related research

    Keywords: Environmental valuation Bounded rationality Dual-process models Heuristics;

    References

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    Cited by:
    1. Li, Xiaoshu & Boyle, Kevin J. & Pullis, Genevieve, 2012. "Does On-site Experience Affect Responses to Stated Preference Questions?," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124991, Agricultural and Applied Economics Association.
    2. León, Carmelo J. & Araña, Jorge E. & Hanemann, W. Michael & Riera, Pere, 2014. "Heterogeneity and emotions in the valuation of non-use damages caused by oil spills," Ecological Economics, Elsevier, vol. 97(C), pages 129-139.
    3. Menzel, Susanne, 2013. "Are emotions to blame? — The impact of non-analytical information processing on decision-making and implications for fostering sustainability," Ecological Economics, Elsevier, vol. 96(C), pages 71-78.

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