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Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism?

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  • James Murphy
  • Thomas Stevens
  • Darryl Weatherhead

Abstract

Significant difference between response to real and hypothetical valuation questions is often referred to as hypothetical bias. Some economists have had success with using “cheap talk” (which entails reading a script that explicitly highlights the hypothetical bias problem before participants make any decisions) as a means of generating unbiased responses in a referendum format. In this article, we test the robustness of cheap talk using a voluntary contribution mechanism with a provision point over a wide range of possible payment amounts. Our results confirm the existence of hypothetical bias, and suggest that cheap talk may eliminate hypothetical bias, but only for respondents facing higher payments. Copyright Springer 2005

Suggested Citation

  • James Murphy & Thomas Stevens & Darryl Weatherhead, 2005. "Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 327-343, March.
    • Handle: RePEc:kap:enreec:v:30:y:2005:i:3:p:327-343
    DOI: 10.1007/s10640-004-4224-y
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