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The effect of knowledge on the disparity between hypothetical and real willingness to pay

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  • Massimo Paradiso
  • Antonella Trisorio
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    Abstract

    The use of a contingent valuation (CV) method is controversial among economists because it is based on hypothetical rather than real economic choices. This paper reports the results of an experiment designed to elicit the real and the hypothetical willingness to pay (WTP) for a private good. The effect of different settings of knowledge (direct and indirect) of the good on subjects' valuation behaviour are investigated. The findings show that (i) a direct knowledge of the good reduces the observed disparity between hypothetical and real WTP; and that (ii) different settings of knowledge generate different perceptions of the characteristics of the good.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840152478039
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 33 (2001)
    Issue (Month): 11 ()
    Pages: 1359-1364

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    Handle: RePEc:taf:applec:v:33:y:2001:i:11:p:1359-1364

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    Cited by:
    1. Joseph Little & Robert Berrens, 2004. "Explaining Disparities between Actual and Hypothetical Stated Values: Further Investigation Using Meta-Analysis," Economics Bulletin, AccessEcon, vol. 3(6), pages 1-13.
    2. Lusk, Jayson L., 2002. "Effects Of Cheap Talk On Consumer Willingness-To-Pay For Golden Rice," 2002 Annual meeting, July 28-31, Long Beach, CA 19597, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. RessurreiĆ§Ć£o, Adriana & Gibbons, James & Dentinho, Tomaz Ponce & Kaiser, Michel & Santos, Ricardo S. & Edwards-Jones, Gareth, 2011. "Economic valuation of species loss in the open sea," Ecological Economics, Elsevier, vol. 70(4), pages 729-739, February.
    4. Kniivila, Matleena, 2006. "Users and non-users of conservation areas: Are there differences in WTP, motives and the validity of responses in CVM surveys?," Ecological Economics, Elsevier, vol. 59(4), pages 530-539, October.
    5. repec:ebl:ecbull:v:3:y:2004:i:6:p:1-13 is not listed on IDEAS
    6. 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.
    7. Royalty, Anne Beeson & Hagens, John, 2005. "The effect of premiums on the decision to participate in health insurance and other fringe benefits offered by the employer: evidence from a real-world experiment," Journal of Health Economics, Elsevier, vol. 24(1), pages 95-112, January.
    8. Massimo Finocchiaro Castro, 2004. "Cultural Education and the Voluntary Provision of Cultural Goods: An Experimental Study," Experimental 0404003, EconWPA, revised 27 Oct 2004.
    9. Jorgensen, Bradley S. & Syme, Geoffrey J. & Nancarrow, Blair E., 2006. "The role of uncertainty in the relationship between fairness evaluations and willingness to pay," Ecological Economics, Elsevier, vol. 56(1), pages 104-124, January.
    10. 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.

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