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Do Experience and Cheap Talk influence Willingness to Pay in an Open-Ended Contingent Valuation Survey?

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Author Info

  • Carlsson, Fredrik

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Martinsson, Peter

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In this paper we analyze the effect of information on respondents’ willingness to pay to avoid power outages in Sweden, by employing an open-ended contingent valuation survey.Two aspects of information are tested; (i) if increased experience from power outages manifested by one of the worst hurricanes ever in Sweden with long power outages as a result and (ii) if a cheap talk script affect the respondents’ WTP. The results indicate that experience increases the proportion of respondents with a zero WTP significantly, which is consistent with the view presented in media in the backwash of the hurricane stressing the right to access power without outages. On the other hand, the cheap talk script decreased the proportion of respondents with zero WTP. In both cases, however, there is no significant effect on the stated WTP conditional on reporting a positive WTP. Thus,information seems to affect the proportion of respondents with a zero WTP, and implications of this on future applications of open-ended contingent valuation surveys are discussed.

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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 190.

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Length: 18 pages
Date of creation: 19 Jan 2006
Date of revision:
Publication status: Published as Carlsson, Fredrik and Peter Martinsson, 'Do Experience and Cheap Talk influence Willingness to Pay in an Open-Ended Contingent Valuation Survey? New title (when published): The effect of power outages and cheap talk on willingness to pay to reduce outages' in Energy Economics, 2011, pages 790-798.
Handle: RePEc:hhs:gunwpe:0190

Note: Published with new title "The effect of power outages and cheap talk on willingness to pay to reduce outages" in Energy Economics, 2011, Vol. 33, pp. 790-798.
Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Contingent Valuation; Cheap talk; Information; Power outages;

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References

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  1. Aadland, David & Caplan, Arthur J., 2006. "Cheap talk reconsidered: New evidence from CVM," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 562-578, August.
  2. Kahneman, Daniel & Ritov, Ilana & Schkade, David A, 1999. "Economic Preferences or Attitude Expressions?: An Analysis of Dollar Responses to Public Issues," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 203-35, December.
  3. Carson, Richard T & Groves, Theodore, 2010. "Incentive and Information Properties of Preference Questions," University of California at San Diego, Economics Working Paper Series qt88d8644g, Department of Economics, UC San Diego.
  4. Carlsson, Fredrik & Martinsson, Peter, 2004. "Willingness to Pay among Swedish Households to Avoid Power Outages - A Random Parameter Tobit Model Approach," Working Papers in Economics 154, University of Gothenburg, Department of Economics.
  5. Fredrik Carlsson & Olof Johansson-Stenman, 2000. "Willingness to pay for improved air quality in Sweden," Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 661-669.
  6. 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.
  7. 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.
  8. Cameron, Trudy Ann & Englin, Jeffrey, 1997. "Respondent Experience and Contingent Valuation of Environmental Goods," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 296-313, July.
  9. Carlsson, Fredrik & Frykblom, Peter & Johan Lagerkvist, Carl, 2005. "Using cheap talk as a test of validity in choice experiments," Economics Letters, Elsevier, vol. 89(2), pages 147-152, November.
  10. Whitehead John C. & Blomquist Glenn C. & Hoban Thomas J. & Clifford William B., 1995. "Assessing the Validity and Reliability of Contingent Values: A Comparison of On-Site Users, Off-Site Users, and Non-users," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 238-251, September.
  11. Klaus Moeltner & David F. Layton, 2002. "A Censored Random Coefficients Model For Pooled Survey Data With Application To The Estimation Of Power Outage Costs," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 552-561, August.
  12. 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.
  13. Thomas C. Brown & Patricia A. Champ & Richard C. Bishop & Daniel W. McCollum, 1996. "Which Response Format Reveals the Truth about Donations to a Public Good?," Land Economics, University of Wisconsin Press, vol. 72(2), pages 152-166.
  14. Bengt Kriström, 1993. "Comparing continuous and discrete contingent valuation questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(1), pages 63-71, February.
  15. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
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Cited by:
  1. Pepermans, Guido, 2010. "The Value of Continuous Power Supply for Flemish Households," Working Papers 2010/24, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  2. Dominique Ami & Frédéric Aprahamian & Olivier Chanel & Stephane Luchini, 2009. "A Test Of Cheap Talk In Different Hypothetical Contexts: The Case Of Air Pollution," Working Papers halshs-00382511, HAL.
  3. Giles Atkinson & Sian Morse-Jones & Susana Mourato & Allan Provins, 2012. "‘When to Take “No” for an Answer’? Using Entreaties to Reduce Protests in Contingent Valuation Studies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(4), pages 497-523, April.
  4. Shi, Lijia & Gao, Zhifeng & Chen, Xuqi, 2014. "The cross-price effect on willingness-to-pay estimates in open-ended contingent valuation," Food Policy, Elsevier, vol. 46(C), pages 13-21.

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