Authors: Andor, Mark A.
Frondel, Manuel
Vance, Colin
Title: Mitigating hypothetical bias
Other Titles: Evidence on the effects of correctives from a large field study
Language (ISO): en
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 about 30,000 responses on WTP for a variety of power mixes from a panel of 6,500 German households and the fixed-effects estimator to control for unobserved heterogeneity, this article simultaneously explores the effects of two common ex-ante approaches – cheap talk and consequential script – and 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 evidence for a lower WTP among those respondents who classify themselves as definitely certain about their answers. Although neither cheap talk nor the consequential-script corrective reduce WTP estimates, receiving either of these scripts increases the probability that respondents indicate definite certainty about their WTP bids.
Subject Headings: willingness-to-pay
certainty approach
cheap talk
Issue Date: 2015
Appears in Collections:Sonderforschungsbereich (SFB) 823

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