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Valuation on the frontier: Calibrating actual and hypothetical statements of value

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  • Richard Hofler
  • John List

Abstract

The lack of robust evidence showing that hypothetical behavior directly maps into real actions remains a major concern for proponents of stated preference nonmarket valuation techniques. This article explores a new statistical approach to link actual and hypothetical statements. Using willingness-topay field data on individual bids from sealed-bid auctions for a $350 baseball card, our results are quite promising. Estimating a stochastic frontier regression model that makes use of data that any contingent valuation survey would obtain, we derive a bid function that is not statistically different from the bid function obtained from subjects in an actual auction. If other data can be calibrated similarly, this method holds significant promise since an appropriate calibration scheme, ex ante or ex post, can be invaluable to the policy maker that desires more accurate estimates of use and nonuse values for nonmarket goods and services.

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Bibliographic Info

Paper provided by The Field Experiments Website in its series Framed Field Experiments with number 00159.

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Date of creation: 2004
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Handle: RePEc:feb:framed:00159

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Web page: http://www.fieldexperiments.com

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  1. List, John A. & Shogren, Jason F., 2002. "Calibration of Willingness-to-Accept," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 219-233, March.
  2. William C. Horrace & Peter Schmidt, 2002. "Confidence Statements for Efficiency Estimates from Stochastic Frontier Models," Econometrics 0206006, EconWPA.
  3. John A. Fox & Jason F. Shogren & Dermot J. Hayes & James B. Kliebenstein, 1998. "CVM-X: Calibrating Contingent Values with Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 455-465.
  4. 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.
  5. 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.
  6. Waldman, Donald M., 1982. "A stationary point for the stochastic frontier likelihood," Journal of Econometrics, Elsevier, vol. 18(2), pages 275-279, February.
  7. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
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Cited by:
  1. Svensson, Mikael, 2006. "The Value of a Statistical Life in Sweden Estimates from Two Studies using the "Certainty Approach" Calibration," Working Papers 2006:6, Örebro University, School of Business, revised 25 Jul 2007.
  2. Kumbhakar, Subal C. & Parmeter, Christopher F. & Tsionas, Efthymios G., 2012. "Bayesian estimation approaches to first-price auctions," Journal of Econometrics, Elsevier, vol. 168(1), pages 47-59.
  3. Norwood, F. Bailey, 2005. "Can Calibration Reconcile Stated and Observed Preferences?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(01), April.
  4. Whittington, Dale & Sur, Dipika & Cook, Joseph & Chatterjee, Susmita & Maskery, Brian & Lahiri, Malay & Poulos, Christine & Boral, Srabani & Nyamete, Andrew & Deen, Jacqueline & Ochiai, Leon & Bhattac, 2009. "Rethinking Cholera and Typhoid Vaccination Policies for the Poor: Private Demand in Kolkata, India," World Development, Elsevier, vol. 37(2), pages 399-409, February.
  5. Devkota, Nirmala & Paudel, Krishna P. & Fannin, James Matthew & Hall, Larry M. & Caffey, Rex H., 2007. "Calibrating Online Survey Sample for Economic Impact Analysis," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34997, Southern Agricultural Economics Association.
  6. Anabela Botelho & Lígia M.Costa Pinto & Patricia Sousa, 2013. "Valuing wind farms’ environmental impacts by geographical distance: A contingent valuation study in Portugal," NIMA Working Papers 52, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  7. GB. Concu, 2004. "A choice modelling approach to investigate biases in individual and aggregated benefit estimates due to omission of distance," Working Paper CRENoS 200412, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  8. Bolliger, Conradin & Reviron, Sophie, 2008. "Consumer Willingness to Pay for Swiss Chicken Meat: An In-store Survey to Link Stated and Revealed Buying Behaviour," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44155, European Association of Agricultural Economists.
  9. 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.
  10. 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), October.

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