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Social context, financial stakes and hypothetical bias: an induced value referendum experiment

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  • Pallab Mozumder
  • Robert Berrens

Abstract

This article investigates the effect of social context in an induced value, public good referendum experiment. In a split-sample treatment, social context is simulated by requiring participants to potentially have to disclose their vote to the group (voting disclosure) across both hypothetical and real settings. The experimental design also varies the cost (a coercive tax), and includes an uncertain level of benefit from the public good. The design allows investigation of the role of social context in both hypothetical and real referenda and its interaction with changes in the financial stakes involved (costs and potential benefits). Results show evidence of hypothetical bias, but also a social context effect that occurs in both real and hypothetical settings. This social context effect is larger than the effect of hypothetical bias, but is muted by the magnitude of costs and potential benefits. Hypothetical cases are also shown to be more prone to the social context effect.

Suggested Citation

  • Pallab Mozumder & Robert Berrens, 2011. "Social context, financial stakes and hypothetical bias: an induced value referendum experiment," Applied Economics, Taylor & Francis Journals, vol. 43(29), pages 4487-4499.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:29:p:4487-4499
    DOI: 10.1080/00036846.2010.491468
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    1. repec:kap:enreec:v:67:y:2017:i:3:d:10.1007_s10640-016-0028-0 is not listed on IDEAS
    2. Little, Joseph & Broadbent, Craig D. & Berrens, Robert P., 2012. "Meta-Analysis of the Probability of Disparity between Actual and Hypothetical Valuation Responses: Extension and Preliminary New Results," Western Economics Forum, Western Agricultural Economics Association, vol. 11(01).

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