Exploring Respondent’s Perception of Bid Precision in Non-Market Valuation

Abstract

Bid design is an important component of the nonmarket valuation process. To date, no research has been done on the possible effects of using round dollar amounts. It seems reasonable to believe that respondents may respond to round dollar amounts differently than they would respond to bids that include both dollar and cent amounts. One possibility is that the respondent may infer that the dollar/cent bids are more precise estimates of the true cost than the round dollar amount, and therefore put more thought into their response to survey questions. In order to explore this idea, we test whether the use of a precise versus imprecise bid design influences respondent’s willingness to pay. In particular, our sample of survey recipients was stratified into two groups based on whether they were presented with imprecise or precise bids (round dollar bids or dollar/cent bids). Precise bids were generated by adding or subtracting a randomly-drawn number of cents (between -200 and +200 cents) to each of the imprecise bid levels. We explore this issue in the context of a valuation project concerned with The Battle of Lexington State Historic Site in Lexington, MO.