Controlling starting-point bias in double-bounded contingent valuation surveys

In this paper, we study starting point bias in double-bounded contingent valuation surveys. This phenomenon arise in applications that use multiple valuation questions. Indeed, response to follow-up valuation questions may be influenced by the bid proposed in the initial valuation question. Previous research have been conducted in order to control for such an effect. However, they find that efficiency gains are lost when we control for undesirable response effects, relative to a single dichotomous choice question. Contrary to these results, we propose a way to control for starting point bias in double-bounded questions with gains in efficiencycontingent valuation

A Shock Therapy Against the “Endowment Effect”

Simple exchange experiments have identified the fact that participants trade their endowment less frequently than standard demand theory predicts. List (2003) finds, however, that the most experienced dealers acting on a well functioning market are not subject to this “endowment effect”. Thus, it seems that a lot of market experience is needed to overcome the “endowment effect”. In order to understand the effect of market experience, we introduce a distinction between two types of uncertainty, choice uncertainty and trade uncertainty, which could both lead to an “endowment effect”. While List’s own explanation is related to choice uncertainty, we conjecture that trade uncertainty is important for the “endowment effect”. To test this conjecture, we design a simple experiment where the two treatments impact differently on trade uncertainty, while controlling for choice uncertainty. Supporting our conjecture, we find that “forcing” subjects to give away their endowment in a series of exchanges, eliminates the “endowment effect” in a subsequent test. We discuss why markets might not succeed in providing sufficient incentives for learning to overcome the “endowment effect”.endowment effect; robustness; experimental economics

When Kahneman meets Manski: making sense of individual expectations on equity returns

To understand how decisions to invest in stocks are taken, economists need to elicit expectations relative to expected risk-return trade-off. One of the few surveys which have included such questions is the Survey of Economic Expectations in 1999-2001. Using this survey, Dominitz and Manski find an important heterogeneity across respondents that can hardly be accounted for by simple models of expectations formation. This paper claims that much of the heterogeneity derives from pathologies affecting respondents. Adapting a principle of dual-reasoning borrowed from Kahneman, we classify respondents according to their sensitivity to these pathologies, and find a strong homogeneity across the less sensitive respondents. We then sketch a model of expectation formation

Starting-point bias and respondent uncertainty in dichotomous choice contingent valuation surveys

In this article, we develop a dichotomous choice model with follow-up questions that describes the willingness to pay being uncertain in an interval. The initial response is subject to starting point bias. Our model provides an alternative interpretation of the starting point bias in the dichotomous choice valuation surveys. Using the Exxon Valdez survey, we show that, when uncertain, individuals tend to answer "yes".starting point bias ; preference uncertainty ; contingent valuation

Model selection in iterative valuation questions

In this article, we propose a unified framework that accomodates many of the existing models for dichotomous choice contingent valuation with follow-up and allows to discriminate between them by simple parametric tests of hypothese. Our empirical results show that the Range model, developped in Flachaire and Hollard (2007}, utperforms other standard models and confirms that, when uncertain, respondents tend to accept proposed bids.starting point bias ; preference uncertainty ; contingent valuation.

Individual sensitivity to framing effects

Surveys are sometimes viewed with suspicion when used to provide economic values, since they are sensitive to framing effects. However, the extent to which those effects may vary between individuals has received little attention. Are some individuals less sensitive to framing effects than others? We use the theory of social representation to assign to each individual a new variable to serve as a proxy for the individual's sensitivity to framing effects. This allows to gather new and relevant information to limit the impact of framing effects. We examine two framing effects, starting-point bias and illingness-to-pay and willingness-to-accept divergence.starting-point bias ; wta-wtp divergence ; social representatio

Incentives to learn calibration: a gender-dependent impact

Miscalibration can be defined as the fact that people think that their knowledge is more precise than it actually is. In a typical miscalibration experiment, subjects are asked to provide subjective confidence intervals. A very robust finding is that subjects provide too narrow intervals at the 90% level. As a result a lot less than 90% of correct answers fall inside the 90% intervals provided. As miscalibration is linked with bad results on an experimental financial market (Biais et al., 2005) and entrepreneurial success is positively correlated with good calibration (Regner et al., 2006), it appears interesting to look for a way to cure or at least reduce miscalibration. Previous attempts to remove the miscalibration bias relied on extremely long and tedious procedures. Here, we design an experimental setting that provides several different incentives, in particular strong monetary incentives i.e. that make miscalibration costly. Our main result is that a thirty-minute training session has an effect on men''s calibration but no effect on women''s.miscalibration, overconfidence, incentives, gender effect

Incentives to Learn Calibration : a Gender-Dependent Impact

Miscalibration can be defined as the fact that people think that their knowledge is more precise than it actually is. In a typical miscalibration experiment, subjects are asked to provide subjective confidence intervals. A very robust finding is that subjects provide too narrow intervals at the 90% level. As a result a lot less than 90% of correct answers fall inside the 90% intervals provided. As miscalibration is linked with bad results on a experimental financial market (Biais et al., 2005) and entrepreneurial success is positively correlated with good calibration (Regner et al., 2006), it appears interesting to look for a way to cure or at least reduce miscalibration. Previous attempts to remove the miscalibration bias relied on extremely long and tedious procedures. Here, we design an experimental setting that provides several different incentives, in particular strong monetary incentives ; i.e. that make miscalibration costly. Our main result is that a thirty-minute training session has an effect on men's calibration but no effect on women's.Miscalibration, overconfidence, incentives, gender effect.

La délibération dans la théorie économique

Plusieurs auteurs (Elster et Hirschman par exemple) soulignent l'importance des questions de délibération pour comprendre le fonctionnement démocratique et, plus largement, celui des organisations. La théorie économique ne rend pourtant guère compte des processus de délibération. Nous voyons à cela des raisons qui tiennent à la conception même que peut avoir la théorie économique de la décision publique. Nous passons ensuite en revue les travaux, encore embryonnaires, qui traitent de cette question au sein de la théorie économique.delibération; démocratie

Heterogeneous anchoring in dichotomous choice valuation framework

This article addresses the important issue of anchoring in contingent valuation surveys that use the double-bounded elicitation format. Anchoring occurs when responses to the follow-up dichotomous choice valuation question are influenced by the bid presented in the initial dichotomous choice question. Specifically, we adapt a theory from psychology to characterize respondents as those who are likely to anchor and those who are not. Using a model developed by Herriges and Shogren (1996), our method appears successful in discriminating between those who anchor and those who did not. An important result is that when controlling for anchoring - and allowing the degree of anchoring to differ between respondent groups - the efficiency of the double-bounded welfare estimate is greater than for the initial dichotomous choice question. This contrasts with earlier research that finds that the potential efficiency gain from the double-bounded questions is lost when anchoring is controlled for and that we are better off not asking follow-up questions.Anchoring; Contingent Valuation; Heterogeneity; Framing effects