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The trade off between time and money: Is there a difference between real and hypothetical choices?

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  • Isacsson, Gunnar

    ()
    (VTI)

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    Abstract

    This paper reports the results from one experiment and one quasi-experiment used to investigate the potential problem of “hypothetical bias” in surveys involving an individual’s valuation of time. The experiment compares hypothetical and real choices regarding an offer to participate in a survey in exchange for money. The quasi-experiment compares hypothetical and real choices regarding two bus journeys, one fast and expensive and the other slow and cheap. In both of these experiments, real choices differ significantly from hypothetical ones. The paper estimates parametric distributions of the value of time by applying the general method of moments (GMM) estimator. Since the samples are relatively small a parametric bootstrap is used to obtain asymptotic refinement of statistical tests. The results in the experiment as well as in the quasi-experiment suggest a value of time which is higher when the choice is for real than when the choice is hypothetical. Assuming that the value of time distribution is exponential, real choices produce a mean value of time twice as large as the corresponding hypothetical value.

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    File URL: http://www.transportportal.se/SWoPEc/Hypo%20bias%20feb07.pdf
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    Bibliographic Info

    Paper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2007:3.

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    Length: 34 pages
    Date of creation: 12 Mar 2007
    Date of revision:
    Handle: RePEc:hhs:vtiwps:2007_003

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    Postal: VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden
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    Web page: http://www.vti.se/tek
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    Related research

    Keywords: Hypothetical bias; Experiment; Value of time; Generalized Method of Moments estimator; Bootstrap; Asymptotic refinement;

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    References

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    1. Andrews, Donald W K, 2001. "Testing When a Parameter Is on the Boundary of the Maintained Hypothesis," Econometrica, Econometric Society, vol. 69(3), pages 683-734, May.
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    7. Cummings, Ronald G & Harrison, Glenn W & Rutstrom, E Elisabet, 1995. "Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-Compatible?," American Economic Review, American Economic Association, vol. 85(1), pages 260-66, March.
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    11. Peter Bohm, 1972. "Estimating the demand for public goods: An experiment," Framed Field Experiments 00126, The Field Experiments Website.
    12. Smith, V. Kerry & Mansfield, Carol, 1996. "Buying Time: Real and Hypothetical Offers," Discussion Papers dp-97-09, Resources For the Future.
    13. 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.
    14. Hall, Peter & Horowitz, Joel L, 1996. "Bootstrap Critical Values for Tests Based on Generalized-Method-of-Moments Estimators," Econometrica, Econometric Society, vol. 64(4), pages 891-916, July.
    15. Boxall, Peter C. & Adamowicz, Wiktor L. & Swait, Joffre & Williams, Michael & Louviere, Jordan, 1996. "A comparison of stated preference methods for environmental valuation," Ecological Economics, Elsevier, vol. 18(3), pages 243-253, September.
    16. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228 Elsevier.
    17. Glenn Harrison, 2006. "Experimental Evidence on Alternative Environmental Valuation Methods," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(1), pages 125-162, 05.
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    Cited by:
    1. Fifer, Simon & Rose, John & Greaves, Stephen, 2014. "Hypothetical bias in Stated Choice Experiments: Is it a problem? And if so, how do we deal with it?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 164-177.
    2. Hensher, David A., 2010. "Hypothetical bias, choice experiments and willingness to pay," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 735-752, July.

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