Conservative dichotomous choice responses in the active policy setting: DC rejections below WTP |
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Authors: | Michael C Farmer Clifford A Lipscomb |
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Institution: | (1) Department of Agricultural and Applied Economics, MS 2132 Texas Tech University, Lubbock, TX 79409, USA;(2) Department of Marketing and Economics, Langdale College of Business Administration, Valdosta State University, Valdosta, GA 31698-0075, USA |
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Abstract: | An important feature of a Contingent Value (CV) study is that researchers design a survey that guides respondents to answer
dichotomous choice (DC) questions as if they represent once-and-for-all choices. Researchers frequently construct hypothetical
markets to satisfy this condition; yet detractors assert that ‘hypotheticality’ leads inevitably to inflated DC responses.
For active policy questions, however, some respondents may suspect that a CV informs an actual policy issue; so to reject a DC might induce the policy-maker to reintroduce the policy with a price reduction or a program
improvement. With potential incentives to deflate a DC response when policies are active, we locate two types of respondents that represent two different incentives. One class
is expected to be able to risk permanent rejection of a waiver from one automobile emissions inspection. This class more frequently
rejects a DC value known to improve existing conditions. Another respondent class is expected to be risk averse to defeat
of the program or to excessive delay. Predictably, these respondents more frequently accept a DC value that represents a known
gain. Conservative DC responses have implications for the use of CV in active policy contexts, opening a role for theory to
assist practitioners in these circumstances.
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Keywords: | Contingent valuation Referendum incentives Multinomial logit |
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