IS CHEAP TALK EFFECTIVE AT ELIMINATING HYPOTHETICAL BIAS IN A PROVISION

Significant difference between response to real and hypothetical valuation questions is often referred to as hypothetical bias. Some economists have had success with using "cheap talk" (which entails reading a script that explicitly highlights the hypothetical bias problem before participants make any decisions) as a means of generating unbiased responses in a referendum format. In this article, we test the robustness of cheap talk using a voluntary contribution mechanism with a provision point over a wide range of possible payment amounts. Our results confirm the existence of hypothetical bias, and suggest that cheap talk may eliminate hypothetical bias, but only for respondents facing higher payments.


Issue Date:
2004
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/14510
Total Pages:
30
JEL Codes:
C9; Q26; H41
Note:
Replaced with revised version of paper 10/06/04.
Series Statement:
Working Paper 2003-2, Revised




 Record created 2017-04-01, last modified 2017-05-27

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