Understanding whether and why people distort their actual preferences when asked a hypothetical question remains a fundamental issue facing environmental economists. Fortunately, a robust literature measuring the nature and extent of hypothetical bias and exploring methodologies to attenuate this tendency has emerged. As a whole, this body of work highlights that statements of value are sensitive to both the mode of elicitation and the way in which survey questions are presented/implemented.
Although no single strategy is a panacea, the experimental literature makes clear that institutions matter. Respondents consider the costs and benefits of distorting their preferences when providing statements of value. Below we review of a body of literature that outlines conditions under which one would expect stated preference methods to elicit “true” preferences and provides practitioners a blueprint for mitigating strategic distortions.
They go on to review the literature on cheap talk and consequentiality. Next, considering field experiments on the willingness to pay vs. willingness to accept:
As a whole, this literature highlights that concerns regarding the stability and consistency of preferences may be overblown. Behavior converges towards neoclassical predictions when investigated within a population of experienced agents familiar with the trading institution. For academics and practitioners alike, these results underscore an important caveat on the earlier literature on the WTP/WTA disparity – institutions and experience matter. As such, the theoretical foundations of welfare economics may be more stable than some would surmise.
Odd, though, that they don't mention Hanemann (1991) and Shogren et al. (1994). I know, the paper focuses on field experiments but the hypothetical bias section discusses Cummings and Taylor (1998), where the cheap talk experiments were conducted in the lab. Maybe because Hanemann's theory hasn't been tested in a field experiment?
This treatment of contingent valuation is very different from two other recent NBER working papers:
*Note: The authors thank "editor Charles Kolstad" so I think the paper is forthcoming in the Review of Environmental Economics and Policy.