Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2006:7: Cognitive Ability and Scale Bias in the Contingent Valuation Method - An Analysis of Willingness to Pay to Reduce Mortality Risks

Mikael Svensson () and Henrik Andersson ()
Additional contact information
Mikael Svensson: Department of Business, Economics, Statistics and Informatics, Postal: Örebro University, Department of Business, Economics, Statistics and Informatics, SE - 701 82 ÖREBRO, Sweden
Henrik Andersson: Department of Transport Economics, Postal: Swedish National Road and Transport Research Institute (VTI), Department of Transport Economics, SE - 581 95 LINKÖPING, Sweden

Abstract: This study investigates whether or not the scale bias found in contingent valuation (CVM) studies on mortality risk reductions is a result of cognitive restraints among respondents. Scale bias refers to insensitivity and non near-proportionality of the respondents' willingness to pay (WTP) to the size of the risk reduction. Two hundred Swedish students participated in an experiment where their cognitive ability was tested before they took part in a CVM-study where they were asked about their WTP to reduce bus-mortality risk. The results imply that WTP answers from respondents with a higher cognitive ability are less flawed by scale bias.

Keywords: Cognitive Ability; Contingent Valuation; Mortality Risk; Near-Proportionality; Scale Bias

JEL-codes: D80; I10; Q51

28 pages, First version: October 26, 2006. Revised: February 12, 2007.

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Published as
Mikael Svensson and Henrik Andersson, (2006), ''Cognitive Ability and Scale Bias in the Contingent Valuation Method - An Analysis of Willingness to Pay to Reduce Mortality Risks', Environmental and Resource Economics, 39: 481-495.', Environmental and Resource Economics, pages 481-495

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