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Some further experimental results on hypothetical versus real willingness to pay

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  • Magnus Johannesson

Abstract

In a previous experiment the null hypothesis of no difference between real and hypothetical willingness to pay for a box of chocolate could not be rejected. In this study we carry out a second experiment to see if we can confirm that finding. The experimental subjects are randomly divided into two groups. One group receives an open-ended hypothetical willingness to pay question and another group participates in a second-price auction with real payments. The mean willingness to pay is SEK 133.33 (STD 78.78) in the hypothetical payment group and SEK 81.62 (STD 62.99) in the real payment group, and the hypothesis of no difference in the mean willingness to pay between the groups can be rejected on the 10% level. In contrast to the first experiment the study thus gives some support for the notion that hypothetical willingness to pay questions overestimates real willingness to pay.

Suggested Citation

  • Magnus Johannesson, 1997. "Some further experimental results on hypothetical versus real willingness to pay," Applied Economics Letters, Taylor & Francis Journals, vol. 4(8), pages 535-536.
    • Handle: RePEc:taf:apeclt:v:4:y:1997:i:8:p:535-536
    DOI: 10.1080/758536641
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    1. Helen R. Neill & Ronald G. Cummings & Philip T. Ganderton & Glenn W. Harrison & Thomas McGuckin, 1994. "Hypothetical Surveys and Real Economic Commitments," Land Economics, University of Wisconsin Press, vol. 70(2), pages 145-154.
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    Cited by:

    1. Franziska Voelckner, 2006. "An empirical comparison of methods for measuring consumers’ willingness to pay," Marketing Letters, Springer, vol. 17(2), pages 137-149, April.
    2. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, March.
    3. Kanya, Lucy & Sanghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: A systematic review and meta-analysis of the evidence," Social Science & Medicine, Elsevier, vol. 232(C), pages 238-261.
    4. M. R. Bhatia & J. A. Fox-Rushby, 2003. "Validity of Willingness to Pay: hypothetical versus actual payment," Applied Economics Letters, Taylor & Francis Journals, vol. 10(12), pages 737-740.
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    6. Kanya, Lucy & Saghera, Sabina & Lewin, Alex & Fox-Rushby, Julia, 2019. "The criterion validity of willingness to pay methods: a systematic review and meta-analysis of the evidence," LSE Research Online Documents on Economics 100741, London School of Economics and Political Science, LSE Library.
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    8. Murphy, James J. & Stevens, Thomas H., 2004. "Contingent Valuation, Hypothetical Bias, and Experimental Economics," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(2), pages 1-11, October.
    9. Carolina Liljenstolpe, 2008. "Evaluating animal welfare with choice experiments: an application to Swedish pig production," Agribusiness, John Wiley & Sons, Ltd., vol. 24(1), pages 67-84.
    10. Helen Neill, 1999. "Hypothetical versus real willingness to pay: comment," Applied Economics Letters, Taylor & Francis Journals, vol. 6(5), pages 267-269.
    11. Munro, Alistair, 2007. "When is some number really better than no number? On the optimal choice between non-market valuation methods," MPRA Paper 8978, University Library of Munich, Germany.
    12. Horowitz, John K. & McConnell, K. E., 2000. "Values elicited from open-ended real experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 221-237, March.
    13. Murat Isik, 2006. "An experimental analysis of impacts of uncertainty and irreversibility on willingness-to-pay," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 67-72.
    14. Taylor, Laura O., 1998. "Incentive Compatible Referenda And The Valuation Of Environmental Goods," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), pages 1-8, October.
    15. Johnston, Robert J., 2006. "Is hypothetical bias universal? Validating contingent valuation responses using a binding public referendum," Journal of Environmental Economics and Management, Elsevier, vol. 52(1), pages 469-481, July.
    16. Pallab Mozumder & Robert P. Berrens, 2007. "Investigating hypothetical bias: induced-value tests of the referendum voting mechanism with uncertainty," Applied Economics Letters, Taylor & Francis Journals, vol. 14(10), pages 705-709.
    17. Johnston, Robert J. & Joglekar, Deepak P., 2005. "Validating Hypothetical Surveys Using Binding Public Referenda: Implications for Stated Preference Valuation," 2005 Annual meeting, July 24-27, Providence, RI 19519, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Obinna Onwujekwe, 2001. "Searching for a better willingness to pay elicitation method in rural Nigeria: the binary question with follow‐up method versus the bidding game technique," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 147-158, March.
    19. Cenk Koçaş & Kivilcim Dogerlioglu-Demir, 2014. "An empirical investigation of consumers’ willingness-to-pay and the demand function: The cumulative effect of individual differences in anchored willingness-to-pay responses," Marketing Letters, Springer, vol. 25(2), pages 139-152, June.
    20. Joseph Eisenhauer & Luigi Ventura, 2006. "The prevalence of hyperbolic discounting: some European evidence," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1223-1234.
    21. Liljenstolpe, Carolina, 2005. "Valuing Animal Welfare with Choice Experiments: An Application to Swedish Pig Production," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24503, European Association of Agricultural Economists.
    22. Beltramo, Theresa & Blalock, Garrick & Levine, David I. & Simons, Andrew M., 2015. "The effect of marketing messages and payment over time on willingness to pay for fuel-efficient cookstoves," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 333-345.
    23. Emmanouil Mentzakis & Jana Sadeh, 2021. "Experimental evidence on the effect of incentives and domain in risk aversion and discounting tasks," Journal of Risk and Uncertainty, Springer, vol. 62(3), pages 203-224, June.

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