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Comparing the Conventional Stated Preference Valuation Technique with a Prediction Approach

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  • Yadav, Lava
  • van Rensburg, Tom M.
  • Kelley, Hugh
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    Abstract

    Stated preference techniques have been used to place values on public goods by directly asking individuals to provide their personal values and opinions. This method has consistently resulted in the emergence of hypothetical bias. Several insights from the psychology literature suggest that social desirability bias, a contributor to hypothetical bias, occurs when individuals face such direct questions. However, replacing the direct questions with an indirect one that asks for their predictions about other’s values can potentially eliminate this bias. In this study we employ both questioning formats in a choice experiment to make comparisons between the stated responses. Predicted willingness to pay is 2.5 and 3.1 times smaller than hypothetical values indicating predictions to be a more accurate measure of actual values. The study further highlights the vulnerability of the conventional approach to a social desirability bias as it allows normative motives to distort respondents’ decisions, which in turn generates preferences for environmental attributes that are misleading.

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    Bibliographic Info

    Paper provided by Agricultural Economics Society in its series 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland with number 91728.

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    Date of creation: 29 Mar 2010
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    Handle: RePEc:ags:aesc10:91728

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    Related research

    Keywords: Stated Preference Techniques; Discrete Choice Experiments; Hypothetical Bias; Social Desirability Bias; Lake Wabegon Effect; False Consensus Effect; Willingness to Pay; Environmental Economics and Policy;

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    1. Johansson-Stenman, Olof & Svedsäter, Henrik, 2007. "Hypothetical bias in choice experiments: Within versus between subject tests," Working Papers in Economics 252, University of Gothenburg, Department of Economics.
    2. Johansson-Stenman, Olof & Martinsson, Peter, 2006. "Honestly, why are you driving a BMW?," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 129-146, June.
    3. Brown, Thomas C. & Ajzen, Icek & Hrubes, Daniel, 2003. "Further tests of entreaties to avoid hypothetical bias in referendum contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 353-361, September.
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