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

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  • James Murphy

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  • 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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    References listed on IDEAS

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    1. Rondeau, Daniel & D. Schulze, William & Poe, Gregory L., 1999. "Voluntary revelation of the demand for public goods using a provision point mechanism," Journal of Public Economics, Elsevier, vol. 72(3), pages 455-470, June.
    2. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 2002. "The private provision of public goods: tests of a provision point mechanism for funding green power programs," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 131-155, February.
    3. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, March.
    4. John A. List, 2004. "Young, Selfish and Male: Field evidence of social preferences," Economic Journal, Royal Economic Society, vol. 114(492), pages 121-149, January.
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    9. Gregory Poe & Jeremy Clark & Daniel Rondeau & William Schulze, 2002. "Provision Point Mechanisms and Field Validity Tests of Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(1), pages 105-131, September.
    10. Champ, Patricia A. & Bishop, Richard C. & Brown, Thomas C. & McCollum, Daniel W., 1997. "Using Donation Mechanisms to Value Nonuse Benefits from Public Goods," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 151-162, June.
    11. 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 260-266, March.
    12. 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.
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