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Implications of Bid Design and Willingness-To-Pay Distribution for Starting Point Bias in Double-Bounded Dichotomous Choice Contingent Valuation Surveys

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  • Marcella Veronesi

    ()

  • Anna Alberini
  • Joseph Cooper

Abstract

We examine starting point bias in CV surveys with dichotomous choice payment questions and follow-ups, and double-bounded models of the WTP responses. We wish to investigate (1) the seriousness of the biases for the location and scale parameters of WTP in the presence of starting point bias; (2) whether or not these biases depend on the distribution of WTP and on the bids used; and (3) how well a commonly used diagnostic for starting point bias—a test of the null that bid set dummies entered in the right-hand side of the WTP model are jointly equal to zero—performs under various circumstances. Because starting point bias cannot be separately identified in any reliable manner from biases caused by model specification, we use simulation approaches to address this issue. Our Monte Carlo simulations suggest that the effect of ignoring starting point bias is complex and depends on the true distribution of WTP. Bid set dummies tend to soak up misspecifications in the distribution assumed by the researcher for the latent WTP, rather than capturing the presence of starting point bias. Their power in detecting starting point bias is low.

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File URL: http://hdl.handle.net/10.1007/s10640-010-9430-1
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 49 (2011)
Issue (Month): 2 (June)
Pages: 199-215

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Handle: RePEc:kap:enreec:v:49:y:2011:i:2:p:199-215

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Anchoring; Bid design; Contingent valuation; Double-bounded dichotomous choice format; Monte Carlo simulations; Starting point bias; Willingness-to-pay distribution;

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References

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Cited by:
  1. Michael Farmer & Clifford Lipscomb, 2008. "Conservative dichotomous choice responses in the active policy setting: DC rejections below WTP," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(3), pages 223-246, March.
  2. Bechtold, Kai-Brit & Abdulai, Awudu, 2012. "Willingness-To-Pay for Functional Dairy Products and the Influence of Starting Point Bias: Empirical Evidence for Germany," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124776, Agricultural and Applied Economics Association.
  3. Kang, Heechan & Haab, Timothy C. & Interis, Matthew G., 2013. "Identifying inconsistent responses in dichotomous choice contingent valuation with follow-up questions," Resource and Energy Economics, Elsevier, vol. 35(3), pages 396-411.

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