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

29 Pages Posted: 27 Jul 2014

See all articles by Mark Andor

Mark Andor

RWI – Leibniz Institute for Economic Research

Manuel Frondel

RWI Leibniz Institute for Economic Research ; Ruhr University Bochum (RUB)

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

Date Written: April 25, 2014

Abstract

The overestimation of willingness-to-pay (WTP) in hypothetical responses is a well-known 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.

Keywords: Willingness-to-pay; cheap talk; certainty approach

JEL Classification: D12, Q21, Q41

Suggested Citation

Andor, Mark and Frondel, Manuel and Vance, Colin, Mitigating Hypothetical Bias – Evidence on the Effects of Correctives from a Large Field Study (April 25, 2014). Available at SSRN: https://ssrn.com/abstract=2471481 or http://dx.doi.org/10.2139/ssrn.2471481

Mark Andor

RWI – Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://en.rwi-essen.de/mark-andor

Manuel Frondel (Contact Author)

RWI Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany

Ruhr University Bochum (RUB) ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
0049-201-8149-237 (Phone)

HOME PAGE: http://www.rwi-essen.de

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