An Experimental Investigation of Explanations for Inconsistencies in Responses to Second Offers in Double Referenda

Abstract

This paper demonstrates the potential for induced preference experiments to test previously unverified explanations of observed behavior in contingent valuation surveys. The NOAA Panel on Contingent Valuation called for experimental evidence on potential biases in the double referendum format. We test Carson, Groves, and Machina’s (Incentives and informational properties of preference questions, Plenary address to the European Association of Resource and Environmental Economists, Oslo, Norway, June 1999) simple cost uncertainty and weighted averaging explanations of inconsistent responses to follow-up offers in such double referenda against a baseline of certainty and truthful preference revelation. The results find evidence to support the Weighted Average hypothesis. Results regarding the cost uncertainty hypothesis are more ambiguous and merit further investigation.

Keywords: Experimental economics, Contingent valuation, Double referenda, Induced preferences

JEL Classification: C91, Q51