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Should We Trust Hypothetical Referenda? Test and Identification Problems

  • Carlsson, Fredrik

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Johansson-Stenman, Olof

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

In a paper published in the Journal of Political Economy, Cummings et al. experimentally compare hypothetical and real-money referenda. They reject the incentive compatibility hypothesis of hypothetical referenda. However, in a comment, Haab et al. claim that the hypothesis cannot be rejected if one corrects for heteroskedasticity. In this note we show that the methodology used by Haab et al. is flawed, and their conclusions unwarranted. Our results rather support the original conclusion that hypothetical referenda appears not to resemble real referenda (unless one has reasons to believe that the true variance is much larger in the hypothetical case). This paper outlines design and identification difficulties arising when statistically comparing real and hypothetical referenda.

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File URL: http://hdl.handle.net/2077/2730
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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 189.

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Length: 12 pages
Date of creation: 19 Jan 2006
Date of revision: 24 Jan 2006
Handle: RePEc:hhs:gunwpe:0189
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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  1. Lusk, Jayson L., 2002. "Effects Of Cheap Talk On Consumer Willingness-To-Pay For Golden Rice," 2002 Annual meeting, July 28-31, Long Beach, CA 19597, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Russell Davidson & James G. MacKinnon, 1982. "Convenient Specification Tests for Logit and Probit Models," Working Papers 514, Queen's University, Department of Economics.
  3. Trudy Ann Cameron & Michelle D. James, 1986. "Efficient Estimation Methods for "Closed-Ended" Contingent Valuation Surveys," UCLA Economics Working Papers 404, UCLA Department of Economics.
  4. Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, . "Are Hypothetical Referenda Incentive Compatible? A Comment," Working Papers 9708, East Carolina University, Department of Economics.
  5. Kiefer, Nicholas M & Skoog, Gary R, 1984. "Local Asymptotic Specification Error Analysis," Econometrica, Econometric Society, vol. 52(4), pages 873-85, July.
  6. John A. List & Robert P. Berrens & Alok K. Bohara & Joe Kerkvliet, 2004. "Examining the Role of Social Isolation on Stated Preferences," American Economic Review, American Economic Association, vol. 94(3), pages 741-752, June.
  7. repec:cup:cbooks:9780521788304 is not listed on IDEAS
  8. Vossler, Christian A. & Kerkvliet, Joe, 2003. "A criterion validity test of the contingent valuation method: comparing hypothetical and actual voting behavior for a public referendum," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 631-649, May.
  9. Cameron, Trudy Ann & Poe, Gregory L. & Ethier, Robert G. & Schulze, William D., 2002. "Alternative Non-market Value-Elicitation Methods: Are the Underlying Preferences the Same?," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 391-425, November.
  10. Yatchew, Adonis & Griliches, Zvi, 1985. "Specification Error in Probit Models," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 134-39, February.
  11. Cummings, Ronald G, et al, 1997. "Are Hypothetical Referenda Incentive Compatible?," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 609-21, June.
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