No abstract

In two experiments on the choice of consumer goods, the estimated marginal willingness to pay for food are found to be lower in the survey version with cheap talk. Our test can be seen as a test of hypothetical bias. This implies we cannot reject the hypothesis of a hypothetical bias for marginal WTP in choice experiments. JEL classification: C91, Q13

Consumer preferences and willingness-to-pay (WTP) for certain non-market food process attributes were investigated using a choice experiment. Swedish consumers were found to be willing to pay a price premium for the use of mobile abattoirs for cattle but not for broilers. We used two different survey versions, with and without an opt-out alternative. There is no evidence that omission of the optout alternative leads to biased choices. In addition, respondents who chose to opt-out were no different from those making trade-offs between attributes. The inclusion of an opt-out alternative has no significant effect on the marginal WTP. Based on estimated distributions of WTP and available cost estimates, the market share for mobile abattoirs is predicted. Here we do find differences between the two survey versions: the version with an opt-out alternative revealed greater unobserved heterogeneity.

The European Union has been relatively cautious about using biotechnology in food production. A label regime combined with the right of individual member states to ban introduction of new genetically modified (GM) strains means that GM food products in effect are banned in many countries. We show how it is possible to empirically test whether a ban can be motivated by reference to potential negative externalities. This is followed up by results from a choice experiment. We cannot reject the hypothesis of equal WTP for a ban and a labeling scheme.

Researchers now use the lab to examine the behavioral underpinnings of valuation before the field application which some argue has less experimental control. But lab valuation work raises its own set of concerns when it uses private goods to explore non-market valuation behavior because private goods have substitutes often unaccounted for in the lab. Therefore, the lab as a tool to testbed field valuation work may be limited. Herein we design an induced valuation experiment to explore bidding behavior in a second-price auction with an outside option that is a perfect substitute for the auction commodity. Theory predicts that rational bidders will consider the prices of outside options when formulating bidding strategies, and will reduce their bids whenever their resale value exceeds the price of the outside option. Our results suggest that bidders account for outside options when formulating bids with behavior following comparative static predictions. In addition, we provide evidence concerning hypothetical versus actual behavior with induced values – the data suggesting a hypothetical bias in the level of bids but not in bid shaving. Copyright Kluwer Academic Publishers 2004bidding behavior, experiments, outside option, valuation,