Are Choice Experiments Incentive Compatible? A Test with Quality Differentiated Beef Steaks

Abstract

This study compares hypothetical and nonhypothetical responses to choice experiment questions. We test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes. In general, hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical resposnes. Thus, hypothetical choices overestimate total willingness-to-pay for beef steaks. However, marginal willingness-to-pay for a change in steak quality is, in general, not statistically different across hypothetical and actual payment settings.CVM, conjoint analysis, heteroskedastic extreme value model, hypothetical bias, multinomial probit, random parameters logit.