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
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: Suggested Citation
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