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Scale factors and hypothetical referenda: A clarifying note

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  • Carlsson, Fredrik
  • Johansson-Stenman, Olof

Abstract

In this note we explore in detail the importance of, and problems associated with, correcting for variance differences between data sets obtained from hypothetical and real referenda. We show that a previous discussion in the literature rests on a problematic estimation of the relative scale factor. The implications are illustrated with data from Cummings et al. (1997) [5], as well as with simulated data. Moreover, we propose a concrete methodology for how to analyze cases where it is difficult, or even impossible, to estimate the relative scale factor due to informational limitations, such as when there is no variation of the bid. We conclude that it is valuable to be able to separate behavioral differences into variance differences and parameter differences in the underlying objective function. Yet, we argue that when using the results to interpret the results of other hypothetical referenda, it is sometimes the net effect, i.e., without correction for scale differences, that matters.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 3 (May)
Pages: 286-292

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:3:p:286-292

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Web page: http://www.elsevier.com/locate/inca/622870

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Keywords: Hypothetical referenda Hypothetical bias Scale parameter Contingent valuation;

References

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  1. Frykblom, Peter, 1997. "Hypothetical Question Modes and Real Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 34(3), pages 275-287, November.
  2. Yatchew, Adonis & Griliches, Zvi, 1985. "Specification Error in Probit Models," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 134-39, February.
  3. Adamowicz W. & Louviere J. & Williams M., 1994. "Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 271-292, May.
  4. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, April.
  5. John List & Craig Gallet, 2001. "What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 20(3), pages 241-254, November.
  6. Kiefer, Nicholas M & Skoog, Gary R, 1984. "Local Asymptotic Specification Error Analysis," Econometrica, Econometric Society, vol. 52(4), pages 873-85, July.
  7. Cummings, Ronald G & Harrison, Glenn W & Rutstrom, E Elisabet, 1995. "Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-Compatible?," American Economic Review, American Economic Association, vol. 85(1), pages 260-66, March.
  8. Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, . "Are Hypothetical Referenda Incentive Compatible? A Comment," Working Papers 9708, East Carolina University, Department of Economics.
  9. Glenn Harrison, 2006. "Experimental Evidence on Alternative Environmental Valuation Methods," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(1), pages 125-162, 05.
  10. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  11. Cummings, Ronald G, et al, 1997. "Are Hypothetical Referenda Incentive Compatible?," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 609-21, June.
  12. Cameron, Trudy Ann & Poe, Gregory L. & Ethier, Robert G. & Schulze, William D., 2002. "Alternative Non-market Value-Elicitation Methods: Are the Underlying Preferences the Same?," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 391-425, November.
  13. Cameron, Trudy Ann, 1988. "A new paradigm for valuing non-market goods using referendum data: Maximum likelihood estimation by censored logistic regression," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 355-379, September.
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Cited by:
  1. Frédéric Roy-Vigneault & Daniel Rondeau & Maurice Doyon & Christian A. Vossler, 2010. "Truth in Consequentiality: Theory and Field Evidence on Discrete Choice Experiments," CIRANO Working Papers 2010s-43, CIRANO.
  2. Johansson-Stenman, Olof & Svedsäter, Henrik, 2011. "Self-Image and Valuation of Moral Goods: Stated versus Real Willingness to Pay," Working Papers in Economics 484, University of Gothenburg, Department of Economics.
  3. Johansson-Stenman, Olof & Svedsäter, Henrik, 2012. "Self-image and valuation of moral goods: Stated versus actual willingness to pay," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 879-891.

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