Hypothetical bias (HB) is widely observed in state preference studies, defined as the discrepancy between the monetary value that individuals are willing to pay for a good under hypothetical scenarios and their actual payment in real-world situations. This bias significantly impairs the external validity of stated preference studies, thereby restricting their generalizability.
Despite the abundant evidence suggesting the existence of HB, there is no consensus on the contributors of HB. Current studies suggest various potential contributors, include psychological factors, strategic behaviors, and elicitation mechanisms (Penn and Hu, 2018). Accordingly, methods to mitigate HB are proposed. Examples include the cheap talk, oath, honest priming, and incentive compatible elicitation mechanism.
Following this stream of literature, this study further investigates the connection between psychological factors and HB, and propose corresponding strategy to mitigate HB.
Specifically, we design three treatments. In Group 1, respondents are initially presented with a hypothetical Becker-DeGroot-Marschak (BDM) mechanism, which captures their willingness to pay (WTP) for non-eyestalk-ablated shrimp. Subsequently, an advisory referendum on hazardous waste recycling is administered, utilizing a payment card elicitation method. In Group 2, respondents finish a BDM task involving real payments, followed by the same advisory referendum as in the first group. In Group 3, respondents are only provided with the advisory referendum section. Eye-tracking techniques and phycological metrics are applied across all three treatments to collect psychological factors.
By comparing WTPs obtained from Group 1 and Group 2, we are able to identify potential psychological factors that contribute to HB. Accordingly, novel mitigation methods within the context of WTP elicitation for private good are proposed. Furthermore, by encompassing all tree treatments, we aim to investigate whether the introduction of real payments for a private good can serve as a priming and reduce the potential HB in the valuation of an unrelated public good. Our study design allows for a deeper understanding of the interplay between psychological factors and HB in the context of private and public good valuation.
The main contributions of our study are threefold. First, we apply more comprehensive and objective measurements to identify the possible contributors of HB, specifically the eye-tracking and phycological metrics. Second, based on findings from our investigation, we propose novel ex post mitigation methods that calibrate WTP using phycological metrics. Third, we utilize the real-payment priming to reduce HB in the valuation of public goods.