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Truthful revelation in nonmarket valuation

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  • Romstad, Eirik

Abstract

A major criticism of contingent valuation methods relates to their hypothetical nature, where truthful revelation of willingness-to-pay is not secured because of the missing link between stated willingness-to-pay and the respondent's budget constraint. Large deviations between stated willingness-to-pay and actual payments in both field and experimental studies where actual payments were collected lend support to these claims. In its utmost format this lends contingent valuation studies vulnerable to strategic behavior. This paper combines the truthful revelation properties of multi-unit uniform price auctions and the median voter theorem to induce truthful revelation. The intuition is as follows : Let the price in the auction be set by the median bid, and pass this price onto a referendum. The expected net gains of passing the referendum would then be positive, implying that the budget constraint would be introduced in a probabilistic manner.

Suggested Citation

  • Romstad, Eirik, 2012. "Truthful revelation in nonmarket valuation," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126724, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae12:126724
    DOI: 10.22004/ag.econ.126724
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