Working Papers in Economics,
University of Gothenburg, Department of Economics

Abstract: In this paper we analyze the effect of information on respondents’ willingness to pay to avoid power outages in Sweden, by employing an open-ended contingent valuation survey.Two aspects of information are tested; (i) if increased experience from power outages manifested by one of the worst hurricanes ever in Sweden with long power outages as a result and (ii) if a cheap talk script affect the respondents’ WTP. The results indicate that experience increases the proportion of respondents with a zero WTP significantly, which is consistent with the view presented in media in the backwash of the hurricane stressing the right to access power without outages. On the other hand, the cheap talk script decreased the proportion of respondents with zero WTP. In both cases, however, there is no significant effect on the stated WTP conditional on reporting a positive WTP. Thus,information seems to affect the proportion of respondents with a zero WTP, and implications of this on future applications of open-ended contingent valuation surveys are discussed.

Keywords: Contingent Valuation; Cheap talk; Information; Power outages

JEL-codes: C25; C93; D12; Q41

18 pages, January 19, 2006

Note: Published with new title "The effect of power outages and cheap talk on willingness to pay to reduce outages" in Energy Economics, 2011, Vol. 33, pp. 790-798.

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