A game of two halves? Incentive incompatibility, starting point bias and the bidding game contingent valuation method

Abstract

The bidding game (BG) method of contingent valuation is one way to increase the precision of willingness to pay (WTP) estimates relative to the single dichotomous choice approach. However, there is evidence that the method may lead to incentive incompatible responses and be associated with starting point bias. While previous studies in health using BGs test for starting point bias, none have also investigated incentive incompatibility. Using a sample of respondents resident in Burkina Faso, West Africa, this paper examines whether the BG method is associated with both incentive incompatibility and starting point bias. We find evidence for both effects. However, average WTP values remained largely unaffected after accounting for both factors in multivariate analyses. The results suggest that the BG method is an acceptable technique in settings where prices for goods are flexible.

Households’ Willingness to Pay for Health Microinsurance and its Impact on Actual Take-up: Results from a Field Experiment in Senegal

“…It has been shown to generate more efficient estimates than those based on a single question (Hanemann, Loomis & Kanninen, 1991), or based on an open-ended follow-up question (Haab & McConnell, 2002;Watson & Ryan, 2007). Moreover, such an approach is suggested in contexts where prices are variable (McNamee, Ternent, Gbangou, & Newlands, 2010), as is the case with MHOs.…”

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