The Value of Private Risk Versus the Value of Public Risk: An Experimental Analysis of the Johannesson et al. Conjecture

In 1996 Johannesson et al. published a paper in this journal entitled “The Value of Private Safety versus the Value of Public Safety.” Based on preliminary evidence from a hypothetical contingent valuation study, these authors argue that consumers behave as “pure altruists” and reject the notion of paternalistic preferences for safety in a coercive tax setting. These pure altruists consider the cost of a program that might be imposed on other voters when they decide whether to vote for or against public safety programs. The authors conclude that further empirical research in this area is warranted. This paper presents a set of laboratory economics experiments to test Johannesson et al.’s conjecture under controlled conditions in which participants face an actual risk of financial loss. The laboratory results extend those of Johannesson et al., providing strong evidence of pure altruism but limited support for paternalistic altruism for risk.Altruism, risk, voting, public goods, Research Methods/ Statistical Methods, Risk and Uncertainty, D81, D64, H41, C91, C92, D72,

PURE ALTRUISM AND THE VALUATION OF RISK: AN EXPERIMENTAL TEST OF THE JOHANNESSON ET AL. CONJECTURE

Johannesson et al.(1996) conjecture that in a coercive, uniform tax setting like dichotomous choice contingent valuation, willingness to pay for public programs would be affected by altruistic consideration of the costs imposed on others. Using a voting-BDM elicitation mechanism, we demonstrate such valuation petterns in an experimental economics setting.Research Methods/ Statistical Methods,

CAN HYPOTHETICAL, QUESTIONS PREDICT ACTUAL, PARTICIPATION IN PUBLIC PROGRAMS? A FIELD VALIDITY TEST USING A PROVISION POINT MECHANISM

Niagara Mohawk Power Corporation utilized a demand revealing public good mechanism to implement a green electricity program for provision of renewable energy and planting trees. This GreenChoiceTM program provided an opportunity to test the reliability of contingent valuation for predicting actual participation levels. In this study, participation levels predicted by hypothetical open-ended and dichotomous choice questions are compared to a reference level obtained from the actual GreenChoiceTM program. This approach represents an important improvement over past public goods contingent valuation validity tests which have relied on voluntary contribution mechanisms to elicit actual willingness to pay, and thus are likely to overestimate hypothetical bias because of free riding. Yet, even with a demand revealing mechanism and controlling for awareness, hypothetical participation levels obtained from dichotomous choice responses are found to significantly exceed actual contributions. In contrast, open-ended responses predict actual contribution levels, in that hypothetical open-ended responses are not significantly different from actual responses. Calibration of hypothetical responses is also explored.Public Economics, Resource /Energy Economics and Policy,

VOLUNTARY REVELATION OF THE DEMAND FOR PUBLIC GOODS USING A PROVISION POINT MECHANISM

public goods, voluntary contributions, provision point, experiments, information, group size, Resource /Energy Economics and Policy, H41, C92,

Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance

The mandatory nature of generic advertising funding remains a contentious issue. Theoretically and in laboratory environments, a provision point mechanism with a money-back guarantee offers an attractive voluntary alternative to the standard voluntary contribution mechanisms, yet in practice, few examples of multiple-round provision point mechanisms exist. A practical concern with applying these mechanisms is that even a slight shortfall in contributions relative to the designated funding threshold in one period would engender an irreversible shutdown of administrative capacity with negative consequences for subsequent periods. This paper uses experimental economics to test new two-threshold provision point mechanisms in the context of check-off programs for funding commodity marketing programs that would separately fund the minimum administrative capacity and the more costly full marketing program. In these mechanisms, even if a funding shortfall occurs for the full marketing program, the low threshold can maintain the administrative capacity and retain the option for future funding of advertising. We demonstrate that providing such "option assurance" does not lead to a decrease in overall contributions and, in some settings, can increase producer surplus.Marketing,

Tension strength of a thick graphite/epoxy laminate after impact by a 1/2-in. radius impactor

NASA is developing graphite/epoxy filament-wound cases for solid rocket motors of the space shuttle. They are wet-wound with AS4W graphite fiber and HBRF-55A epoxy. The membrane region is about 1.4 inches thick. Two 30-inch-diameter by 12-inch-long cylinders were impacted every two inches of circumference with 1/2-inch radius impactors that were dropped from various heights. One cylinder was empty and the other was filled with inert propellant. Two-inch-wide test specimens were cut from the cylinders. Each was centered on an impact site. The specimens were x-rayed and loaded to failure in uniaxial tension. Rigid body mechanics and the Hertz law were used to predict impact force, local deformations, contact diameters, and contact pressures. The depth of impact damage was predicted using Love's solution for pressure applied on part of the boundary of a semi-infinite body. The predictions were reasonably good. The strengths of the impacted specimens were reduced by as much as 37 percent without visible surface damage. Even the radiographs did not reveal the nonvisible damage

Surface crack analysis applied to impact damage in a thick graphite-epoxy composite

The residual tensile strength of a thick graphite/epoxy composite with impact damage was predicted using surface crack analysis. The damage was localized to a region directly beneath the impact site and extended only part way through the laminate. The damaged region contained broken fibers, and the locus of breaks in each layer resembled a crack perpendicular to the direction of the fibers. In some cases, the impacts broke fibers without making a visible crater. The impact damage was represented as a semi-elliptical surface crack with length and depth equal to that of the impact damage. The maximum length and depth of the damage were predicted with a stress analysis and a maximum shear stress criterion. The predictions and measurements of strength were in good agreement

A COMPARISON OF HYPOTHETICAL PHONE AND MAIL CONTINGENT VALUATION RESPONSES FOR GREEN PRICING ELECTRICITY PROGRAMS

To date, much of the policy and research debate on contingent valuation mode effects has relied on experiences drawn from other research disciplines. This study provides the first contingent valuation phone-mail comparison that meets current standards for response rates, draws from a general population, is relevant to the valuation of general environmental goods, and allows comparisons with actual sign-ups. Consistent with previous research in other disciplines, social desirability bias is found in responses to subjective questions --thus leading to more environmentally favorable responses on the phone. However, this effect does not carry over to hypothetical participation decisions. Hypothetical bias is found in both modes. Yet, application of calibration methods using debriefing questions provided nearly identical values across modes. As such, neither mode appears to dominate from the perspective of providing more valid estimates of actual participation decisions. The selection of survey mode must be based on other criteria.Environmental Economics and Policy,

Social Preferences and Voting: An Exploration Using a Novel Preference Revealing Mechanism

Public referenda are frequently used to determine the provision of public goods. As public programs have distributional consequences, a compelling question is what role if any social preferences have on voting behavior. This paper explores this issue using laboratory experiments wherein voting outcomes lead to a known distribution of net benefits across participants. Preferences are elicited using a novel Random Price Voting Mechanism (RPVM), which is a more parsimonious mechanism than dichotomous choice referenda, but gives consistent results. Results suggest that social preferences, in particular a social efficiency motive, lead to economically meaningful deviations from self-interested voting choices and increase the likelihood that welfare-enhancing programs are implemented.Institutional and Behavioral Economics, Research Methods/ Statistical Methods, C91, C92, D64, D72, H41,

ANOMALIES IN VOTING: AN EXPERIMENTAL ANALYSIS USING A NEW, DEMAND REVEALING (RANDOM PRICE VOTING) MECHANISM

This study investigates the influence of social preferences on voting decisions using a new Random Price Voting Mechanism (RPVM), which is best thought of as a public goods voting extension of the Becker-DeGroot-Marshack mechanism for private goods. In particular, this mechanism is used to investigate experimentally whether voting decisions are affected by the distribution of net benefits associated with a proposed public program. Recent papers have shown that, in additional to selfishness, factors such as inequality aversion, maximin preferences, and efficiency may influence individual decisions. However, the effect of social preferences on voting, the predominant funding mechanism for public goods by legislatures and public referenda, has not been thoroughly examined. We first establish the presence of anomalous behavior in dichotomous voting, and introduce the RPVM as a more efficient mechanism to examine such anomalies. We show that it is demand revealing in the presence of social preferences and empirically consistent with dichotomous choice voting. Laboratory experiments involving 440 subjects show that when net benefits are homogeneously distributed, the new RPVM is demand-revealing in both willingness-to-pay (WTP) and willingness-to-accept (WTA) settings, for both gains and losses. When the voting outcome potentially results in a heterogeneous distribution of (net) benefits, a systematic wedge appears between individuals' controlled induced values and their revealed WTP or WTA. With induced gains, the best-off subjects under-report their WTP and WTA in comparison to their induced value. Worst-off subjects express WTP and WTA that exceed their induced value. With induced losses a mirror image is evident. Best-off subjects over-report their induced value while the worst-off subjects under-report. Theoretical and econometric results presented in the paper suggest that these differences are caused by a concern for social efficiency.Institutional and Behavioral Economics,