What would others do? Revisiting inferred valuation to mitigate social desirability bias in stated preferences. / Job Market Paper

Abstract

Stated preference practitioners have focused on introducing methods to reduce measurement errors in willingness to pay (WTP) and willingness to accept (WTA) caused by well-known biases. Among these methods, inferred valuation (IFV) offers an alternative to identifying social desirability (SDB) by asking respondents to infer the behavior of a reference group. To test the validity of this approach, we explore the importance of respondents’ perceived income similarities to their neighbors and to the average citizens when inferring their preferences regarding the reclamation of Oil Sands Processed Water (OSPW) in Northern Alberta. We find evidence of SDB in our sample and that perceived similarities influence the inferred WTP and WTA. However, it is not possible to conclude the direction of this variable when analyzing if participants perceive that they have a higher or lower income than the reference group. Furthermore, we find some evidence that the use of IFV could help to reduce the gap between WTP and WTA, showing that future research could benefit by implementing it for both cases and by increasing the information provided about the reference group.