Correcting for Starting Point Bias in the Elicitation of Willingness to Pay for Health

Willingness to pay (WTP) has become an important tool in economic analysis, despite the difficulty to obtain reliable estimates. This paper investigates the occurrence of starting point bias when eliciting WTP for health, a domain where this phenomenon has received limited attention, and illustrates its effect on equivalent consumption, a preference-based well-being measure. In an online experiment, three experimental groups responded to two dichotomous choice questions, with varying initial bids. The treatment groups then provided exact estimates for their WTP in an open-ended question. We find strong evidence for the existence of the bias using both non-parametric and parametric tests, and estimate a sizeable overall effect. Different parametric specifications yield point estimates between 29 and 43 percent for the first bid, whereas the effect of the second bid, which we estimate using an instrumental variable approach, is not statistically different from zero. We propose two ex post approaches to address this effect when using WTP data for interpersonal well-being comparisons. Although the percentage of rankings reversals is relatively small across all feasible comparisons, it becomes notable when examining comparisons for individuals within the same consumption deciles.