Hypothetical bias

I'm updating the paper I presented at the 2004 Southern Economic Association meetings "Mitigating the Hypothetical Bias of Willingness to Pay: A Comparison of Ex-Ante and Ex-Post Approaches" (with Todd Cherry).

Here is a definition of the problem from the paper:

The most persistently troubling empirical result in the CVM (contingent valuation method) literature is the tendency for hypothetical willingness to pay to overestimate real willingness to pay in laboratory and field settings. This is known as hypothetical bias. Respondents tend to state that they will pay for a good when in fact they will not, or they will actually pay less, when placed in a similar purchase decision. Hypothetical bias is usually attributed to the presence of passive use values and lack of familiarity of paying for resources that provide passive use value. However, hypothetical bias has been found in a variety of applications including private goods for which no passive use values should exist.

Some background, the CVM is one of the most often used methods to place values on environmental amenities such as air and water quality. It is often used for regulatory analysis by the EPA and other government agencies.

A search on ECONLIT for the keywords "contingent valuation method" finds 3282* papers. Of the revealed preference approaches to valuing the environment, "travel cost" gets 410, "hedonic price" gets 641, and "averting behavior" gets only 22.

So, hypothetical bias sounds like a big deal, right? Right!

And every CVM research should be trying to deal with it, right? Wrong!

Of the 3282 papers that have "contingent valuation" as a keyword, only 29 also have "hypothetical bias" as a keyword. So, I suppose that the benefit estimates derived from the CVM in the remaining 3253* papers are biased upwards.

Shame.

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*There is also a "contingent valuation" in finance so many of these papers aren't dealing with the environmental CVM. There are 567 papers with "contingent valuation method" as a keyword but these do not include all of the environmental-type CVM studies.

Comments

[Essam]

I rather have a question. Since I am new to this field of study, how can I measure actual payment. As for hypothetical (stated) WTP values there is no problem, but I don't know much about estimating actual WTP values. Can you suggest me any reading material?