Consequentiality and the Willingness-To-Pay for Renewables: Evidence from Germany

Abstract

Based on hypothetical responses originating from a large-scale survey among about 7,000 German households, this study investigates the discrepancy in willingness-to- pay (WTP) estimates for green electricity across discrete-choice and open-ended valuation formats, thereby accounting for perceived consequentiality: respondents selfselect into two groups distinguished by their belief in the consequentiality of their answers for policy making. Recognizing that consequentiality status and WTP might be jointly influenced by unobservable factors, we employ a switching regression model that accounts for the potential endogeneity of respondents’ belief in consequences and, hence, biases from sample selectivity. Contrasting with the received literature, we find WTP bids that tend to be higher among those respondents who obtained questions in the open-ended format, rather than single binary choice questions. This difference shrinks, however, when focusing on individuals who perceive the survey as politically consequential.