Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2009:1: Certainty calibration in contingent valuation - exploring the within-difference between dichotomous choice and open-ended answers as a certainty measure

Björn Sund ()
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Björn Sund: Department of Business, Economics, Statistics and Informatics, Postal: Örebro University, Swedish Business School, SE - 701 82 ÖREBRO, Sweden

Abstract: Hypothetical bias is a serious problem of stated preference techniques. The certainty approach calibrates answers by assessing different weights to remedy respondents’ valuation. However, very little research has been done to find a link between economic theory and empirical treatment of uncertainty through certainty calibration. We use a combination of dichotomous choice (DC) followed by an open-ended (OE) question to examine the relation between the degree of confidence and the distance between the DC bid and the OE answer. The results show that the OE bid difference is significantly correlated to the certainty level in one of our two contingent valuation (CV) surveys, with the probability of stating the highest confidence value increasing between 5-19 percent per SEK 1000 (~$170/€106) that the answer to the OE question and the bid differ. The second CV survey shows a significant relation for the no-responders.

Keywords: Contingent valuation; Hypothetical bias; Calibration; Certainty approach; Value of a statistical life; Traffic safety; Cardiac arrest

JEL-codes: H43; I18; R41

40 pages, February 3, 2009

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