Bounded rationality in contingent valuation: Empirical evidence using cognitive psychology
Survey based valuation techniques like the Contingent Valuation Method (CVM) rely particularly on the premise of respondents' rationality when answering willingness to pay (WTP) questions. Results of CVM surveys have repeatedly put this fundamental assumption into question. This study adopts a more realistic view of rationality accounting for respondents' limited capacities to process information. Based on cognitive psychology a technique to detect and analyze the bounds of rationality inherent in WTP statements is developed. Using an empirical example, the influence of bounded rationality on the validity of CVM results is analyzed. It is shown that individual differences in information processing play a major role for the validity of CVM responses. The results allow new insights into response behavior in dichotomous-choice versus payment card elicitation formats. From the results of this study recommendations for future survey designs taking into account respondents' different information processing modes are developed.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Ahlheim & Benchaphun Ekasingh & Oliver Frör & Jirawan Kitchaincharoen & Andreas Neef & Chapika Sangkapitux & Nopasom Sinphurmsukskul, 2007. "Using Citizen Expert Groups in Environmental Valuation - Lessons from a CVM study in Northern Thailand," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 283/2007, Department of Economics, University of Hohenheim, Germany.
- Richard C. Ready & Jean C. Buzby & Dayuan Hu, 1996. "Differences between Continuous and Discrete Contingent Value Estimates," Land Economics, University of Wisconsin Press, vol. 72(3), pages 397-411.
- Joseph Cooper & John Loomis, 1992. "Sensitivity of Willingness-to-Pay Estimates to Bid Design in Dichotomous Choice Contingent Valuation Models," Land Economics, University of Wisconsin Press, vol. 68(2), pages 211-224.
- Patricia A. Champ & Richard C. Bishop, 2006. "Is Willingness to Pay for a Public Good Sensitive to the Elicitation Format?," Land Economics, University of Wisconsin Press, vol. 82(2), pages 162-173.
- Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
- Herriges, Joseph A. & Shogren, Jason F., 1996.
"Starting Point Bias in Dichotomous Choice Valuation with Follow-Up Questioning,"
Staff General Research Papers
1501, Iowa State University, Department of Economics.
- Herriges, Joseph A. & Shogren, Jason F., 1996. "Starting Point Bias in Dichotomous Choice Valuation with Follow-Up Questioning," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 112-131, January.
- McDaniels, Timothy L. & Gregory, Robin & Arvai, Joseph & Chuenpagdee, Ratana, 2003. "Decision structuring to alleviate embedding in environmental valuation," Ecological Economics, Elsevier, vol. 46(1), pages 33-46, August.
- Gregory, Robin & Lichtenstein, Sarah & Slovic, Paul, 1993. " Valuing Environmental Resources: A Constructive Approach," Journal of Risk and Uncertainty, Springer, vol. 7(2), pages 177-97, October.
- Li Chuan-Zhong & Mattsson Leif, 1995. "Discrete Choice under Preference Uncertainty: An Improved Structural Model for Contingent Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 256-269, March.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Butler, David & Loomes, Graham, 1997. "Quasi-rational Search under Incomplete Information: Some Evidence from Experiments," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(2), pages 127-44, March.
- Welsh, Michael P. & Poe, Gregory L., 1998. "Elicitation Effects in Contingent Valuation: Comparisons to a Multiple Bounded Discrete Choice Approach," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 170-185, September.
- Ryan, Mandy & Scott, David A. & Donaldson, Cam, 2004. "Valuing health care using willingness to pay: a comparison of the payment card and dichotomous choice methods," Journal of Health Economics, Elsevier, vol. 23(2), pages 237-258, March.
- Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
- Jorgensen, Bradley S. & Syme, Geoffrey J., 2000. "Protest responses and willingness to pay: attitude toward paying for stormwater pollution abatement," Ecological Economics, Elsevier, vol. 33(2), pages 251-265, May.
- Dale Whittington, 2002.
"Improving the Performance of Contingent Valuation Studies in Developing Countries,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 22(1), pages 323-367, June.
- Dale Whittington, 2007. "Improving the Performance of Contingent Valuation Studies in Developing Countries," EEPSEA Special and Technical Paper sp200709s1, Economy and Environment Program for Southeast Asia (EEPSEA), revised Sep 2007.
- MacMillan, Douglas & Hanley, Nick & Lienhoop, Nele, 2006. "Contingent valuation: Environmental polling or preference engine?," Ecological Economics, Elsevier, vol. 60(1), pages 299-307, November.
- 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.
- 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.
- David K. Whynes & Jane L. Wolstenholme & Emma Frew, 2004. "Evidence of range bias in contingent valuation payment scales," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 183-190.
- Cameron, Trudy Ann & Huppert, Daniel D., 1989. "OLS versus ML estimation of non-market resource values with payment card interval data," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 230-246, November.
- Christopher G. Leggett & Naomi S. Kleckner & Kevin J. Boyle & John W. Dufield & Robert Cameron Mitchell, 2003. "Social Desirability Bias in Contingent Valuation Surveys Administered Through In-Person Interviews," Land Economics, University of Wisconsin Press, vol. 79(4), pages 561-575.
- Meyerhoff, Jurgen & Liebe, Ulf, 2006. "Protest beliefs in contingent valuation: Explaining their motivation," Ecological Economics, Elsevier, vol. 57(4), pages 583-594, June.
- DeShazo, J. R., 2002. "Designing Transactions without Framing Effects in Iterative Question Formats," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 360-385, May.
- Fischer, Anke & Hanley, Nick, 2007. "Analysing decision behaviour in stated preference surveys: A consumer psychological approach," Ecological Economics, Elsevier, vol. 61(2-3), pages 303-314, March.
- John Conlisk, 2003. "A Note on Convergence of Adaptive Satisficing to Optimal Stopping," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1353-1360, December.
- W. George Hutchinson & Susan M. Chilton & John Davis, 1995. "Measuring Non-Use Value Of Environmental Goods Using The Contingent Valuation Method: Problems Of Information And Cognition And The Application Of Cognitive Questionnaire Design Methods," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(1), pages 97-112.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:68:y:2008:i:1-2:p:570-581. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.