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Mitigating Hypothetical Bias – Evidence on the Effects of Correctives from a Large Field Study

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  • Andor, Mark A.
  • Frondel, Manuel
  • Vance, Colin

Abstract

The overestimation of willingness-to-pay (WTP) in hypothetical responses is a wellknown finding in the literature. Various techniques have been proposed to remove or, at least, reduce this bias. Using responses from a panel of about 6,500 German households on their WTP for a variety of power mixes, this article undertakes an analysis that combines two common ex-ante approaches - cheap talk and consequential script - with the ex-post certainty approach to calibrating hypothetical WTP responses. Based on a switching regression model that accounts for the potential endogeneity of respondent certainty, we find that while neither the cheap-talk nor the consequential script corrective bears on the estimates of WTP, there is evidence for a lower WTP among those respondents who classify themselves as definitely certain about their answers.

Suggested Citation

  • Andor, Mark A. & Frondel, Manuel & Vance, Colin, 2014. "Mitigating Hypothetical Bias – Evidence on the Effects of Correctives from a Large Field Study," Ruhr Economic Papers 480, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:480
    DOI: 10.4419/86788544
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    2. Lehberger, Mira & Grüner, Sven, 2021. "Consumers’ willingness to pay for plants protected by beneficial insects – Evidence from two stated-choice experiments with different subject pools," Food Policy, Elsevier, vol. 102(C).
    3. Picard, Julien & Banerjee, Sanchayan, 2023. "Behavioural spillovers unpacked: estimating the side effects of social norm nudges," LSE Research Online Documents on Economics 120566, London School of Economics and Political Science, LSE Library.
    4. Eßer, Jana & Frondel, Manuel & Sommer, Stephan, 2021. "Soziale Normen und der Emissionsausgleich bei Flügen: Evidenz für deutsche Haushalte," RWI Materialien 139, RWI - Leibniz-Institut für Wirtschaftsforschung.
    5. Mark A. Andor & Manuel Frondel & Stephan Sommer, 2018. "Equity and the willingness to pay for green electricity in Germany," Nature Energy, Nature, vol. 3(10), pages 876-881, October.
    6. Zawojska, Ewa & Bartczak, Anna & Czajkowski, Mikołaj, 2019. "Disentangling the effects of policy and payment consequentiality and risk attitudes on stated preferences," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 63-84.
    7. Wei, Xuan & Khachatryan, Hayk, 2023. "How consequential is policy consequentiality? Evidence from online discrete choice experiment with ornamental plants," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    8. Simora, Michael & Frondel, Manuel & Vance, Colin, 2018. "Does financial compensation increase the acceptance of power lines? Evidence from Germany," Ruhr Economic Papers 742, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Mark A. Andor & Manuel Frondel & Marco Horvath, 2021. "Consequentiality, Elicitation Formats, and the Willingness to Pay for Green Electricity: Evidence from Germany," Land Economics, University of Wisconsin Press, vol. 97(3), pages 626-640.
    10. Ellis, Jade & Delong, Karen L. & Jensen, Kimberly L. & Griffith, Andrew P., 2021. "The Impact of a Visual Cheap Talk Script in an Online Choice Experiment," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 12(01), January.
    11. Manuel Frondel and Gerhard Kussel, 2019. "Switching on Electricity Demand Response: Evidence for German Households," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    12. Nilgen, Marco & Rode, Julian & Vorlaufer, Tobias & Vollan, Björn, 2024. "Measuring non-use values to proxy conservation preferences and policy impacts," Ecosystem Services, Elsevier, vol. 67(C).
    13. Mark A. Andor & Manuel Frondel & Colin Vance, 2017. "Germany’s Energiewende: A Tale of Increasing Costs and Decreasing Willingness-To-Pay," The Energy Journal, , vol. 38(1_suppl), pages 211-228, June.
    14. Simora, Michael & Frondel, Manuel & Vance, Colin, 2020. "Do financial incentives increase the acceptance of power lines? Evidence from Germany," Regional Science and Urban Economics, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    willingness-to-pay; cheap talk; certainty approach;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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