What Differences Do Certainty and Cheap Talk Make in Eliciting Willingness to Pay for Education?

Abstract

Hypothetical estimates of willingness to pay tend to overstate realwillingness to pay. Several methods to mitigate this so called hypothetical bias have beendeveloped. This paper contributes by presenting the first simultaneous comparison ofthree common hypothetical bias mitigation methods as well as their interactions. Inaddition, the study represents the first use of the contingent valuation method to valuehigher education. The findings of the study suggest that models adjusting for certaintyaccording to definitely sure yes responses are most similar to the model that adjusts forcertainty at a level of 8 or higher. These calibrations yield point estimates of meanwillingness to pay only a quarter to a third of estimates that do not account for certainty.Surprisingly the cheap talk treatment leads to yes respondents indicating responses witha higher level of certainty and higher mean willingness to pay (D61, I20).