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Using choice experiments to value non-market goods and services: Evidence from field experiments

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  • John List
  • Paramita Sinha
  • Michael Taylor

Abstract

Critics of stated preference methods argue that hypothetical bias precludes survey techniques from providing reliable economic values for non-market goods and services, rendering estimation of the total economic benefits of public programs fruitless. This paper explores a relatively new methodology to obtain the total value of non-market goods and services—choice experiments—which conveniently provide information on the purchase decision as well as the characteristic value vector. The empirical work revolves around examining behavior in two very different field settings. In the first field study, we explore hypothetical bias in the purchase decision by eliciting contributions for a threshold public good in an actual capital campaign. To extend the analysis a level deeper, in a second field experiment we examine both the purchase decision and the marginal value vector via inspection of consumption decisions in an actual marketplace. In support of the new valuation design, both field experiments provide some evidence that hypothetical choice experiments combined with ""cheap talk"" can yield credible estimates of the purchase decision. Furthermore, we find no evidence of hypothetical bias when estimating marginal attribute values. Yet, we do find that the ""cheap talk"" component might induce internal inconsistency of subjects’ preferences in the choice experiment.

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Bibliographic Info

Paper provided by The Field Experiments Website in its series Natural Field Experiments with number 00278.

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Date of creation: 2006
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Handle: RePEc:feb:natura:00278

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

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  1. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
  2. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May.
  3. Cummings, Ronald G, et al, 1997. "Are Hypothetical Referenda Incentive Compatible?," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 609-21, June.
  4. John A. List & David Lucking-Reiley, 2000. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Vanderbilt University Department of Economics Working Papers 0008, Vanderbilt University Department of Economics.
  5. John A. List & Robert P. Berrens & Alok K. Bohara & Joe Kerkvliet, 2004. "Examining the Role of Social Isolation on Stated Preferences," American Economic Review, American Economic Association, vol. 94(3), pages 741-752, June.
  6. 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.
  7. Vivien Foster & Ian J. Bateman & David Harley, 1997. "Real And Hypothetical Willingness To Pay For Environmental Preservation: A Non-Experimental Comparison," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 123-137.
  8. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  9. Nick Hanley & Robert Wright & Vic Adamowicz, 1998. "Using Choice Experiments to Value the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 413-428, April.
  10. Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, 1999. "Are Hypothetical Referenda Incentive Compatible? A Comment," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 186-196, February.
  11. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December.
  12. David Aadland & Arthur J. Caplan, 2003. "Willingness to Pay for Curbside Recycling with Detection and Mitigation of Hypothetical Bias," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 492-502.
  13. Carlsson, Fredrik & Martinsson, Peter, 2001. "Do Hypothetical and Actual Marginal Willingness to Pay Differ in Choice Experiments?: Application to the Valuation of the Environment," Journal of Environmental Economics and Management, Elsevier, vol. 41(2), pages 179-192, March.
  14. Laura O. Taylor & Ronald G. Cummings, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June.
  15. Wiktor Adamowicz & Peter Boxall & Michael Williams & Jordan Louviere, 1998. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 64-75.
  16. V. Kerry Smith, 1999. "Of Birds and Books: More on Hypothetical Referenda," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 197-200, February.
  17. 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.
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