What's to Know About Hypothetical Bias in Stated Preference Valuation Studies?

8 Pages Posted: 7 Mar 2011

See all articles by John B. Loomis

John B. Loomis

Colorado State University, Fort Collins - Department of Agriculture and Resource Economics

Abstract

Hypothetical bias arises in stated preference valuation studies when respondents report a willingness to pay (WTP) that exceeds what they actually pay using their own money in laboratory or field experiments. Although this bias is not found in all stated preference surveys, hypothetical WTP typically exceeds the actual value by a factor of two to three. Unfortunately, there is no widely accepted general theory of respondent behaviour that explains hypothetical bias. Therefore, two meta-analyses are reviewed to test current hypotheses regarding the causes of this overstatement of WTP and the associated recommendations to mitigate the bias. Suggestions for future research are made including the development of a general theory.

Keywords: Contingent Valuation Method, Experiments, Validity

Suggested Citation

Loomis, John B., What's to Know About Hypothetical Bias in Stated Preference Valuation Studies?. Journal of Economic Surveys, Vol. 25, No. 2, pp. 363-370, 2011, Available at SSRN: https://ssrn.com/abstract=1777808 or http://dx.doi.org/10.1111/j.1467-6419.2010.00675.x

John B. Loomis (Contact Author)

Colorado State University, Fort Collins - Department of Agriculture and Resource Economics ( email )

B310 Andrew G. Clark
Fort Collins, CO 80523
United States
970-491-2485 (Phone)

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