Hypothetical Bias in Risk Preferences as a Driver of Hypothetical Bias in Willingness to Pay: Experimental Evidence

This study provides new insight on the established issue of elicitation bias in hypothetical choice settings. In particular, using an experiment that elicits real and hypothetical willingness to pay for the protection of otters, we provide evidence that the observed bias is driven by those who are both uncertain about their value and exhibit hypothetical bias in risk attitudes. This finding provides a reason why calibration approaches based on follow-up certainty questions have proven useful, but also suggests a degree of caution in applying the approach. Our results favour combining uncertainty calibration with CVM-X in which hypothetical bias in risk attitudes is also taken account to correct for hypothetical bias in WTP.