The Referendum Incentive Compatibility Hypothesis:Some New Results Using Information Messages
We report results from a laboratory experiment that allows us to test the incentive compatibility hypothesis of hypothetical referenda used in CV studies through the public or private provision of information messages. One of the main methodological issues about hypothetical markets regards whether people behave differently when bidding for a public good through casting a ballot vote than when they are privately purchasing an equivalent good. This study tried to address the core of this issue by using a good that can be traded both as private and public: information messages. This allows the elimination of confounding effects associated with the specific good employed. In our case information dispels some of the uncertainty about a potential gain from a gamble. So, the approximate value of the message can be inferred once the individual measure of risk aversion is known. Decision tasks are then framed in a systematic manner according to the hypothetical vs real nature of the decision and the public vs private nature of the message. A sample of 536 university students across three countries (I, UK and NZ) participated into this lab experiment. The chosen countries reflect diversity in exposure to the practice of advisory (NZ) and abrogative (Italy) referenda, with the UK not having any exposure to it. Under private provision the results show that the fraction of participants unwilling to buy information is slightly higher in the real treatment than in the hypothetical one. Under public provision, instead, there is no statistical difference between real and hypothetical settings, confirming in part the finding of previous researchers. A verbal protocol analysis of the thought processes during choice highlights that public provision of information systematically triggers concerns and motivations different from those arising under the private provision setting. These findings suggest that the incentive compatibility of public referenda is likely to rely more on affective and psychological factors than on the strategic behaviour assumptions theorised by economists.
|Date of creation:||13 Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Private Bag 3105, Hamilton, New Zealand, 3240|
Phone: + 64 (0)7 838 4758 (Administrator)
Fax: + 64 7 838 4331
Web page: http://cms.mngt.waikato.ac.nz/departments/economics
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harrison, Glenn W., 1986. "An experimental test for risk aversion," Economics Letters, Elsevier, vol. 21(1), pages 7-11.
- Carson, Richard T. & Hanemann, W. Michael, 2006.
Handbook of Environmental Economics,
in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 17, pages 821-936
- Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, 1999.
"Are Hypothetical Referenda Incentive Compatible? A Comment,"
Journal of Political Economy,
University of Chicago Press, vol. 107(1), pages 186-196, February.
- 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.
- Henrik Svedsäter, 2003. "Economic Valuation of the Environment: How Citizens Make Sense of Contingent Valuation Questions," Land Economics, University of Wisconsin Press, vol. 79(1), pages 122-135.
- Glenn Harrison, 2006. "Experimental Evidence on Alternative Environmental Valuation Methods," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(1), pages 125-162, 05.
- 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.
- 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 260-66, March.
- Carson, Richard T & Groves, Theodore, 2010.
"Incentive and Information Properties of Preference Questions,"
University of California at San Diego, Economics Working Paper Series
qt88d8644g, Department of Economics, UC San Diego.
- Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
- Schkade David A. & Payne John W., 1994. "How People Respond to Contingent Valuation Questions: A Verbal Protocol Analysis of Willingness to Pay for an Environmental Regulation," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 88-109, January.
When requesting a correction, please mention this item's handle: RePEc:wai:econwp:07/10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brian Silverstone)
If references are entirely missing, you can add them using this form.