Hypothetical Bias in Dichotomous Choice Contingent Valuation Studies

Michael Ash, University of Massachusetts - Amherst
James J. Murphy, University of Massachusetts - Amherst
Thomas H. Stevens, University of Massachusetts - Amherst

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Working Paper 2004-9

Abstract

This paper uses a meta-analysis to explore the relationship between hypothetical bias and the price respondents are asked to pay. For public goods, the results clearly indicate a difference in the price elasticity between hypothetical and actual payment conditions. Since the bias increases for larger dollar amounts, any simple guidelines, such as NOAA’s “divide by two” rule of thumb, could be misleading. Future attempts to calibrate contingent valuation responses should reflect this price sensitivity.