Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism?

University of Massachusetts, Amherst Resource Economics Working Paper No. 2003-2

30 Pages Posted: 13 May 2003

See all articles by James J. Murphy

James J. Murphy

University of Alaska Anchorage

Thomas Stevens

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics

Darryl A. Weatherhead

Government of the United States of America - Environmental Protection Agency (EPA)

Date Written: September 10, 2004

Abstract

Significant difference between response to real and hypothetical valuation questions is often referred to as hypothetical bias. Some economists have had success with using "cheap talk" (which entails reading a script that explicitly highlights the hypothetical bias problem before participants make any decisions) as a means of generating unbiased responses in a referendum format. In this article, we test the robustness of cheap talk using a voluntary contribution mechanism with a provision point over a wide range of possible payment amounts. Our results confirm the existence of hypothetical bias, and suggest that cheap talk may eliminate hypothetical bias, but only for respondents facing higher payments.

Keywords: contingent valuation, experiments, hypothetical bias, voluntary contributions

JEL Classification: C9, Q26, H41

Suggested Citation

Murphy, James J. and Stevens, Thomas and Weatherhead, Darryl A., Is Cheap Talk Effective at Eliminating Hypothetical Bias in a Provision Point Mechanism? (September 10, 2004). University of Massachusetts, Amherst Resource Economics Working Paper No. 2003-2. Available at SSRN: https://ssrn.com/abstract=390640 or http://dx.doi.org/10.2139/ssrn.390640

James J. Murphy (Contact Author)

University of Alaska Anchorage ( email )

Anchorage, AK
United States
907-786-1936 (Phone)

HOME PAGE: http://faculty.cbpp.uaa.alaska.edu/jmurphy/

Thomas Stevens

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003-9246
United States

Darryl A. Weatherhead

Government of the United States of America - Environmental Protection Agency (EPA) ( email )

U.S. Environmental Protection Agency (1809T)
MD:C339-01
Research Triangle Park, NC 27711
United States
919-541-2270 (Phone)
919-541-8309 (Fax)

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