TEL  Vol.5 No.6 , December 2015
Hypothetical Bias for Private Goods: Does Cheap Talk Make a Difference?
ABSTRACT
Economists and market researchers often need to accurately gauge consumers’ willingness-to-pay for private goods. The experimental literature has identified a problem of hypothetical bias when using stated preferences techniques, such as open-ended questions. It has been suggested that using a cheap talk script has the potential to resolve this bias. Yet, few empirical studies on the efficiency of cheap talk for private goods exist. This study uses a between-subjects experimental design to compare consumers’ willingness-to-pay for DHA-enriched milk using three elicitation methods: 1) Hypothetical open-ended stated preference question, without monetary consequence for the respondent; 2) Idem to the first with the addition of a cheap talk script; and 3) A Vickrey auction with real monetary consequences. In this experiment subjects have the choice to participate, or not, at each period. Our results indicate a significant hypothetical bias. While the use of cheap talk has no impact on this bias, it does however increase the level of participation to the market.

Cite this paper
Doyon, M. , Saulais, L. , Ruffieux, B. and Bweli, D. (2015) Hypothetical Bias for Private Goods: Does Cheap Talk Make a Difference?. Theoretical Economics Letters, 5, 749-756. doi: 10.4236/tel.2015.56087.
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