a comment on neudeck and podczeck s adverse selection and regulation in health insurance markets abstract using the grossman equilibrium concept neudeck and podczeck journal of health economics 15 1996 387 show that imposing a minimum standard on a perfectly competitive insurance market can result in anti competitive effects decreased welfare with some insurers earning positive profits however the grossman concept precludes an insurer from offering two separating cross subsidizing health plans when an insurer can offer multiple plans as under both the nash and miyazaki wilson equilibrium concepts i show that minimum standards result in a doubleton equilibrium never allow positive total profits and increase welfare this is of interest since in 1997 more than half of establishments in the us offering choice of multiple plans did so through a single insurer

alternative value elicitation formats in contingent valuation mechanism design and convergent validity abstract to date much of the theoretical work on the incentive properties of contingent valuation surveys has focused on the oft recommended single binary choice sbc referendum format this work has identified conditions under which an sbc elicitation is incentive compatible and empirical evidence lends support to the predictive power of the theory nevertheless researchers and practitioners commonly use alternative elicitation formats and defend their design choices based on efficiency and other criteria in this study we demonstrate that it is possible to identify conditions under which alternative elicitation formats are incentive compatible using as examples open ended oe and payment card pc question formats we then implement theory informed value elicitations in the context of a flood control policy for new york city we fail to reject convergent validity in mean willingness to pay when comparing the theory driven oe format with sbc but reject convergent validity between the theory driven pc and sbc formats as an informative counterfactual we find that a standard oe elicitation congruent with prior work leads to significantly lower values and a lower proportion of respondents who view the elicitation as consequential

competition among differentiated health plans under adverse selection market power and adverse selection are prevalent features of the market for pre paid health plans however most of the literature on adverse selection considers extreme cases either perfect competition or monopoly if instead health plans are horizontally differentiated then i profits derived from each low risk are higher than from each high risk and ii when the profits derived from each high risk are negative cross subsidization a health authority as informed as the health plans can implement a pareto improvement both local and global deviations from cross subsidization are addressed within a nash equilibrium framework

induced value tests of the referendum voting mechanism abstract an induced value laboratory experiment is conducted testing the incentive compatibility of the referendum voting mechanism for eliciting willingness to pay for public goods although errors were observed at the individual level aggregate results suggest incentive compatibility in both hypothetical and real referenda

bridging the gap between the field and the lab environmental goods policy maker input and consequentiality abstract this paper explores the criterion validity of stated preference methods through experimental referenda that capture key characteristics of a stated preference survey for a proposed environmental program in particular we investigate whether advisory referenda where participant votes have either known or unknown weight in the policy decision can elicit values comparable to that of a standard incentive compatible referendum when participants regard their votes as consequential our results suggest there is no elicitation bias with advisory referenda for advisory referenda where participants view their votes as inconsequential and for purely hypothetical referenda we observe elicitation bias

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

employment protection legislation and firm growth evidence from a natural experiment a swedish reform in 2001 made it possible for firms with less than 11 employees to exclude two from the last in first out principle in case of layoffs the reform increased employment growth with o

a simple tax structure for competitive equilibrium and redistribution in insurance markets with asymmetric information in their influential paper rothschild and stiglitz 6 demonstrated that the existence of nash equilibrium is not a general property of insurance markets when buyers have private information about their riskiness and firms face free entry and exit conditions this paper presents a simple and implementable system of taxes and subsidies applied to firms which permits a nash equilibrium always to exist we also show that more than one nash equilibrium is open to the regulator in particular government can effect risk discriminating redistribution without a priori knowledge of any individual buyer s riskiness hence it is not the case that the inability to distinguish between types of buyers rules out compensation risk discriminating transfers even in principle as claimed by schmalensee 7 442 finally we show that even when a nash equilibrium exists without government intervention there are always alternative and under some circumstances pareto superior equilibria open to the regulator since these alternative equilibria entail cross subsidization from low risk to high risk buyers our results suggest that the well known cross subsidization enforced through current regulatory practices is consistent with economic efficiency we conclude that the informational asymmetry assumed by rothschild and stiglitz poses distinct efficiency and distribution problems as do more conventional non informational situations of market failure and that regulators can influence the allocation of insurance through conventional instruments of intervention without assuming dictatorial control of the market

the efficiency of competitive equilibria in insurance markets with asymmetric information abstract this paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information using the definition of second best efficiency proposed by harris and townsend 1981 for environments characterized by informational assmmetry the efficiency properties of several proposed market equilibria are examined we find an analogue to the first optimality theorem a miyazaki wilson equilibrium always results in a second best allocation

endogenous consequentiality in stated preference referendum data the influence of the randomly assigned tax amount recent empirical and theoretical research stresses it is important for survey respondents to believe that survey votes are consequential meaning their votes can potentially influence whether a proposed policy is undertaken we test the effect of a randomly assigned referendum tax on consequentiality using a survey about water conservation in western north carolina we find that consequentiality is endogenous to hypothetical referendum responses specifically as the assigned tax amount increases respondents are less likely to find the survey consequential as in related studies respondents who self report they perceive the survey to be consequential have a higher willingness to pay

minimum standards insurance regulation and adverse selection evidence from the medigap market abstract this paper examines the implications of minimum standards for insurance markets i study the imposition of binding minimum standards on the market for voluntary private health insurance for the elderly the central estimates suggest that the introduction of the standards was associated with an 8 percentage point 25 decrease in the proportion of the population with coverage in the affected market with no evidence of substitution toward other unregulated sources of insurance coverage to explore possible factors contributing to the impact of the minimum standards i develop comparative static predictions of the impact of imposing minimum standards in an insurance market with adverse selection the observed changes in market equilibrium associated with the minimum standards are broadly consistent with these predictions providing evidence of the existence of adverse selection in this insurance market more importantly they suggest that the presence of adverse selection which in principle may provide an economic rationale for minimum standards in practice may have exacerbated the declines in insurance coverage associated with the minimum standards

imitation contagion or exertion using a tax reform to reveal how colleagues sick leaves influence worker behaviour we analyse the social interaction effects in sick leave behaviour in the workplace using high quality norwegian matched employer employee data with detailed individual information on sick leaves during the 2004 2006 period we find that social interaction effects in sick leave behaviour in the workplace do exist and that the effects are noticeable in size the strong relationship between the sick leave rates among colleagues is not solely the result of contagious diseases nor is it caused by improved informational quality or by the increased workload for the non absent workers evidence supports the existence of reciprocal worker behaviour that is unrelated to joint leisure seeking activities

understanding the consequences of consequentiality testing the validity of stated preferences in the field this study pursues the external validation of stated preference methods by comparing survey responses from verified voters with the outcome of a parallel public referendum on a conservation and preservation program to be funded by a local property tax surcharge the majority of respondents were unaware of the upcoming referendum and the experimental design allows us to control for referenda related information effects as well as respondents perceptions regarding the consequentiality i e the potential policy impact of their survey votes we find the survey under predicts yes referendum votes at the precinct level these differences go away however if we focus only on respondents who perceived their survey vote to be consequential negative hypothetical bias among inconsequential survey respondents is also evident in the estimation of willingness to pay and controlling for consequentiality increases construct validity

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

the effect of school choice on participants evidence from randomized lotteries school choice has become an increasingly prominent strategy for enhancing academic achievement to evaluate the impact on participants we exploit randomized lotteries that determine high school admission in the chicago public schools compared to those students who lose lotteries students who win attend high schools that are better in a number of dimensions including peer achievement and attainment levels nonetheless we find little evidence that winning a lottery provides any systematic benefit across a wide variety of traditional academic measures lottery winners do however experience improvements on a subset of nontraditional outcome measures such as self reported disciplinary incidents and arrest rates

peer effects in medical school abstract using data on the universe of students who graduated from us medical schools between 1996 and 1998 we examine whether the abilities and specialty preferences of a medical school class affect a student s academic achievement in medical school and his choice of specialty we mitigate the selection problem by including school specific fixed effects and show that this method yields an upper bound on peer effects for our data we estimate positive peer effects that disappear when school specific fixed effects are added to control for the endogeneity of a peer group we find no evidence that peer effects are stronger for blacks that peer groups are formed along racial lines or that students with relatively low ability benefit more from their peers than students with relatively high ability however we do find some evidence that peer groups form along gender lines

gasoline demand revisited an international meta analysis of elasticities meta analysis is used to determine if there are factors that systematically affect price and income elasticity estimates in studies of gasoline demand four econometric models are estimated using long run and short run price and income elasticity estimates from previous studies as the dependent variables explanatory variables include functional form lag structure time span national setting estimation technique and other features of the model structure elasticity estimates are found to be sensitive to the inclusion or exclusion of some measure of vehicle ownership static models appear to overestimate short run elasticities underestimate long run price elasticities but pick up the full long run income responsiveness there is variation in the elasticity of demand across countries especially in the short run and gasoline demand appears to be getting more price elastic and less income elastic over time

an inferred valuation method although estimates of people s values for public goods are often needed to conduct cost benefit analysis existing value elicitation methods are prone to a number of well documented biases we argue that some of these biases result because people derive utility from the act of saying they are willing to pay for a good to counteract this phenomenon we consider an approach that asks people to predict or infer others values for a good instead of asking people to state their own value both a conceptual model and results from a laboratory experiment lend support for the new approach

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

reliability and predictive validity of contingent values does the nature of the good matter abstract because the contingent valuation mechanism cvm elicits verbal reports of maximum willingness to pay and not actual willingness to pay analysts have expressed doubts about the reliability and validity of contingent values for commodities such as environmental amenities this skepticism is usually attributed to the amorphous nature of the commodity and to peoples lack of familiarity or experience however our comparison of two commodities which lie at polar extremes of the private good public good continuum suggests that the nature of the good may have little influence on the reliability and predictive validity of the cvm instead aspects of the cvm itself e g explicit payment obligation may be more important for high intention behavior consistency

adverse selection and regulation in health insurance markets abstract in this paper we look at various ways to regulate the health insurance market and ask whether they provide an answer to the problem of adverse selection to avoid inefficiency government policy must either effectuate some cross subsidization of insurance policies within the state sector or grant private insurance firms an exclusive right to serve certain groups of the population recent reforms in the netherlands and germany and president clinton s proposals for the us could be adapted to fulfil these requirements efficiency cannot be achieved on the other hand if the regulator tries to prescribe cross subsidization within the private sector

what experimental protocol influence disparities between actual and hypothetical stated values preferences elicited in hypothetical settings have recently come underscrutiny causing estimates from the contingent valuation method to bechallenged due to perceived hypothetical bias given that the receivedliterature derives value estimates using heterogeneous experimentaltechniques understanding the effects of important design parameters onthe magnitude of hypothetical bias is invaluable in this paper we addressthis issue statistically by using a meta analysis to examine data from 29experimental studies our empirical findings suggest that on averagesubjects overstate their preferences by a factor of about 3 in hypotheticalsettings and that the degree of over revelation is influenced by thedistinction between willingness to pay and willingness to accept publicversus private goods and several elicitation methods

health economics worldwide i issues in health insurance 1 pricing and imperfections in the medical care market place 2 how can we prevent cream skimming in a competitive health insurance market the great challenge for the 90s 3 the impact of utilization review on costs and utilization 4 the normative and positive economics of minimum health benefits ii criteria for allocating health care resources 1 cost effectiveness analysis of strategies for screening prostatic cancer 2 the validity of the mimic health index some empirical evidence 3 welfare economics and cost utility analysis iii administrative and market allocation in health care 1 excess demand and patient selection for heart and liver transplantation 2 non price allocative procedures scottish solutions to a national health service problem 3 priorities among waiting list patients 4 consumer information price and nonprice competition among hospitals iv health care in the political arena 1 cost containment in health care justification and consequences 2 political economy of hospital financing 3 a pooled cross sectional analysis of the health care expenditure of the oecd countries 4 is there a sisyphus syndrome in health care 5 deaths from gastrointestinal cancer in mexico probable cause for water sampling index of names index of subjects

the old boy and girl network social network formation on university campuses this paper documents the structure and composition of social networks on university campuses and investigates the processes that lead to their formation using administrative data and information from facebook com we document the factors that are the strongest predictors of whether two students are friends race is strongly related to social ties even after controlling for a variety of measures of socioeconomic background ability and college activities we develop a model of the formation of social networks that decomposes the formation of social links into effects based upon the exogenous school environment and effects of endogenous choice arising from preferences for certain characteristics in one s friends we use student level data from an actual social network to calibrate the model we simulate the social network under alternative university policies aimed at reducing social segmentation we find that changes in the school environment that affect the likelihood that two students interact have only a limited potential to reduce the racial segmentation of the social network

premium subsidies for health insurance excessive coverage vs adverse selection the tax subsidy for employment related health insurance can lead to excessive coverage and excessive spending on medical care yet the potential also exists for adverse selection to result in the opposite problem insufficient coverage and underconsumption of medical care this paper uses the model of rothschild and stiglitz r s to show that a simple linear premium subsidy can correct market failure due to adverse selection the optimal linear subsidy balances welfare losses from excessive coverage against welfare gains from reduced adverse selection indeed a capped premium subsidy may mitigate adverse selection without creating incentives for excessive coverage

public support for hosting the olympic summer games in germany the cvm approach cities and their respective regions must weigh the merits of hosting major sport events including the olympic games this paper presents a contingent valuation method estimate of the monetary value of intangible benefits to germans of hosting the olympic summer games in a nationwide online survey 6977 respondents said whether they would support a referendum to host the games the survey employed a payment card format containing monthly tax amounts to elicit individual willingness to pay for the games over a five year period in the weighted sample 26 expressed an average willingness to pay of 51 willingness to pay varied widely across regions around cologne the average willingness to pay was 100 interval data hurdle models reveal that policy consequentiality and various intangible benefits increased willingness to pay aggregate willingness to pay over a five year period amounted to 46 billion which exceeded the estimated costs of the 2024 summer games for hamburg the findings have implicatio

addressing empirical challenges related to the incentive compatibility of stated preferences methods abstract an emerging theoretical literature focused on the incentive compatibility of stated preference surveys offers a new lens through which to view extant evidence on external validity and provides guidance for practitioners however critical theoretical assumptions rest on latent respondent beliefs such as the belief that respondents view surveys as potentially influencing policy i e policy consequentiality which gives rise to pressing empirical challenges in this study we develop a hybrid mixed logit model capable of integrating multiple latent beliefs and subjective measures of these beliefs into a discrete choice model of stated preferences planned use of a resource which can also be considered a latent variable is frequently an important consideration when modelling stated preferences for a change in a good and we demonstrate how our framework can be used to incorporate this information simultaneously we further explore whether simple information treatments which vary the degree to which the potential role of surveys in informing policy is emphasized can influence respondent beliefs our results suggest that latent beliefs over consequentiality resource use and to a much lesser extent the information treatments significantly influence elicited willingness to pay

monetary rewards and decision cost in experimental economics a survey of thirty one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows 1 several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models 2 in virtually all cases rewards reduce the variance of the data around the predicted outcome this is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction

laboratory testbeds and non market valuation the case of bidding behavior in a second price auction with an outside option researchers now use the lab to examine the behavioral underpinnings of valuation before the field application which some argue has less experimental control but lab valuation work raises its own set of concerns when it uses private goods to explore non market valuation behavior because private goods have substitutes often unaccounted for in the lab therefore the lab as a tool to testbed field valuation work may be limited herein we design an induced valuation experiment to explore bidding behavior in a second price auction with an outside option that is a perfect substitute for the auction commodity theory predicts that rational bidders will consider the prices of outside options when formulating bidding strategies and will reduce their bids whenever their resale value exceeds the price of the outside option our results suggest that bidders account for outside options when formulating bids with behavior following comparative static predictions in addition we provide evidence concerning hypothetical versus actual behavior with induced values the data suggesting a hypothetical bias in the level of bids but not in bid shaving

an incentive compatible conjoint ranking mechanism a simple method for making ranking based conjoint analysis incentive compatible is proposed the incentive compatible mechanism involves people purchasing a product profile with a probability proportional to its assigned rank in an empirical application related to consumer preferences for beef attributes we find that the forecasted market share for a new pasture raised steak obtained using incentive compatible rankings was significantly greater than that implied from traditional hypothetical conjoint rankings people s rankings of ground beef products were not affected by the mechanism or by information about pasture raised beef copyright 2008 oxford university press

contingent valuation a new perspective after several decades of academic research on the contingent valuation cv method a consistent behavioral explanation of hypothetical bias is still lacking based on evidence from economics economic psychology and the political sciences i propose an explanation that is based on two simple working hypotheses about respondent behaviour in contingent valuation surveys the first hypothesis is that survey respondents are unable to form consistent preferences about unfamiliar goods unless the choice context offers reliable informative cues that can be rationally exploited in simplified heuristics the second hypothesis is that the probability and impact of strategic responses in dichotomous choice questions about public goods depends on the extent to which the presented hypothetical costs differ from the actual costs the literature on hypothetical bias is revisited in the light of these behavioral hypotheses i find that the hypotheses are generally supported by the empirical data moreover the hypotheses are able to explain several important empirical phenomena that previous research has not been able to explain in particular they solve the puzzle that pre election polls but not cv surveys are able to predict actual referendum outcomes and they explain why income effects on willingness to pay are lower in cv responses than in actual votes if confirmed by further studies the hypotheses will have important implications for future research and practice first the hypothetical costs presented in the dichotomous choice question should to be close enough to the actual costs to be credible to all respondents this can be achieved by specifying the costs as a percentage rather than absolute change in taxes second the respondents should be given the option to answer based on information about the positions of large parties and interest groups with known political orientation rather than based on the raw policy information theory and evidence suggest that this new survey paradigm largely eliminates the fundamental problems of the conventional stated preference methods

what is a peer the role of network definitions in estimation of endogenous peer effects we employ a standard identification strategy from the peer effects literature to investigate the importance of network definitions in estimation of endogenous peer effects we use detailed information on friends in the national longitudinal study of adolescent health survey add health to construct two network definitions that are less ad hoc than the school grade cohorts commonly used in the educational peer effects literature we demonstrate that accurate definitions of the network seriously impact estimation of peer effects in particular we show that peer effects estimates on educational achievement smoking and drinking are substantially larger with our more detailed measures than with the school grade cohorts these results highlight the need to further understand how friendships form in order to fully understand implications for policy that alters the peer group mix at the classroom or cohort level

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

convergent validity of attribute based choice questions in stated preference studies the application of attribute based choice questions is well established in the marketing literature but there are unique aspects of the design that warrant investigation to assess their validity for economic welfare estimation three design issues are investigated in this paper 1 the placement of the monetary stimulus policy cost to respondents in the sequence of attributes 2 the number of policy alternatives respondents are asked to consider in choice questions two versus three and 3 the inclusion versus exclusion of a status quo alternative in choice questions the data used to implement these investigations are from a survey designed to estimate the value maine residents place on a farmland conservation easement program tests of convergent validity indicate that the placement of the monetary stimulus first versus last in the list of attributes did not affect estimates of preference parameters significant differences between questions with three versus two alternatives did occur and the inclusion exclusion of a status quo alternative did not affect preference parameters

revealed and stated preferences for co2 emissions reduction the missing link abstract in this paper we combine data collected from two strands of literature dealing with revealed preferences expressed by conventional vehicle drivers for fuel price variation and stated preferences expressed by consumers for alternative fuel vehicles we employ a meta analysis approach drawing data on 30 primary studies reflecting two important policy interventions which are fuel price taxation and subsidies for alternative fuel vehicles this is a new contribution in environmental and energy economics in that we rescale all primary information into a unique index which captures consumers economic attitude towards carbon dioxide co2 emission reduction in monetary terms focusing on the transport sector we compute the implicit price for the avoidance of a kilogram of co2 emissions named pco2 explaining the existing heterogeneity from several points of view the results of the meta analysis show that contextual and individual characteristics influence the implicit price for co2 emissions avoidance this implicit price is on average positive in the case of revealed preferences studies whereas it is negative in the stated preferences studies although there are some important geographical differences our results show that fuel taxes could be an important additional instrument for environmental policy

setting health plan premiums to ensure efficient quality in health care minimum variance optimal risk adjustment abstract risk adjustment refers to the practice of paying health plans a premium per person or per family based on a formula using risk adjusters such as age or gender and weights on those adjusters one role of risk adjustment is to make sure plans have an incentive to accept all potential enrollees another role at least as important in our view is to lead health plans to choose the efficient level of quality of care for the various services they offer most of the research and policy literature on risk adjustment focuses on the first problem this paper proposes a new way to calculate weights in a risk adjustment formula that contends with both problems for a given set of adjusters we identify the weights that minimize the variance in plan predictable health care costs that are not explained by risk adjustment addressing the access problem subject to the payments satisfying conditions for an optimal risk adjuster making sure plans provide the efficient quality we call the formula minimum variance optimal risk adjustment mvora

resolving questions about bias in real and hypothetical referenda despite 10 years of research on behavior in hypothetical referenda conflict remains in the literature on whether or not the mechanism generates biased responses compared to real referenda and the nature and source of any such bias almost all previous inquiry in respect of this issue has concentrated on bias at the aggregate level this paper reports a series of three experiments which focuses on bias at the individual level and how this can translate to bias at the aggregate level the authors argue that only an individual approach to hypothetical bias is consistent with the concept of incentive compatibility the results of these experiments reflect these previous conflicting findings but go on to show that individual hypothetical bias is a robust result driven by the differing influence of pure self interest and other regarding preferences in real and hypothetical situations rather than by a single behavioral theory such as free riding in a hypothetical situation these preferences cause yea saying and non demand revealing voting this suggests that investigation of individual respondents in other hypothetical one shot binary choices may also provide us with insights into aggregate behavior in these situations

stated versus revealed knowledge determinants of offsetting co2 emissions from fuel consumption in vehicle use abstract this paper examines the role of prior knowledge in offsetting co2 emissions from fuel consumption in vehicle use the main result of our econometric analysis on the basis of unique representative data from drivers license holders in the usa and germany refers to the strong discrepancy between the stated and revealed knowledge of co2 offsetting the revealed knowledge measured by the correct estimation of the costs for this offsetting practice has a positive impact on the stated purchase of corresponding offsetting credits in both countries in contrast the effect of the stated knowledge of offsetting is not robust and in some cases even negative surprisingly it cannot even be confirmed that drivers license holders who claim that they are more than sufficiently informed estimate these costs more accurately

efficient estimation methods for closed ended contingent valuation surveys closed ended contingent valuation surveys can be very useful in the evaluation of nonmarket resources respondents merely state whether they would accept or reject a hypothetical threshold amount either as payment for giving up access to the resource or as a fee for its use the authors develop a maximum likelihood procedure which exploits the variation in the threshold values to allow direct and separate point estimates of regression like slope coefficients and error standard deviations without truncation bias their illustration uses data from a survey of recreational fisherman to examine factors which influence individuals willingness to pay copyright 1987 by mit press

it s not your peers and it s not your friends some progress toward understanding the educational peer effect mechanism abstract using a new administrative panel data set from the university of maryland this paper explores conventional peer effects and the effects of socially proximate peers at a large public university where some students are randomly assigned to housing results show that there is little evidence of robust residential peer effects on undergraduate performance the impact of socially proximate peers characteristics on student achievement is then examined using an instrumental variables technique results indicate that social friends do not impact performance more than randomized peers the paper casts doubt on the notion that social tie formation is the route to peer effects and urges caution in the continued pursuit of peer effects in education without substantial empirical or theoretical innovation

using ex ante approaches to obtain credible signals for value in contingent markets evidence from the field while contingent valuation remains the only option available for measurement of total economic value of nonmarketed goods the method has been criticized due to its hypothetical nature we analyze field experimental data to evaluate two ex ante approaches to attenuating hypothetical bias directly comparing value statements across four distinct referenda hypothetical cheap talk consequential and real our empirical evidence suggests two major findings hypothetical responses are significantly different from real responses and responses in the consequential and cheap talk treatments are statistically indistinguishable from real responses we review the potential for each method to produce reliable results in the field

networks or neighborhoods correlations in the use of publicly funded maternity care in california abstract this study focuses on network effects in the utilization of publicly funded prenatal care using vital statistics data from california for 1989 2000 networks are defined using 5 digit zip codes and a woman s racial or ethnic group like others we find evidence that the use of public programs is highly correlated within groups defined using race ethnicity and neighborhoods these correlations persist even when we control for many unobserved characteristics by including zip code year fixed effects and when we focus on the interaction between own group behavior and measures of the potential for contacts with other members of the group contact availability however the richness of our data allows us to go further and to conduct several tests of one important hypothesis about networks that the estimated effects represent information sharing within groups the results cast doubt on the idea that the observed correlations can be interpreted as evidence of information sharing in particular we find estimated effects to be as large or larger among women who have previously used the program as among first time users

using neuroeconomics to understand environmental valuation contingent valuation choice experiments and other stated preference methods are frequently used to capture the nonmarket valuation of natural resources and ecosystem services the emerging field of neuroeconomics which assesses the neuroscience underlying decision making plots a promising course to explore the mechanisms underlying complex environmental valuation decisions neuroeconomic methods offer a unique capacity to isolate value components that contribute to willingness to pay wtp separating an individual s response to natural resource attributes that are of interest to economists from other attributes or influences on the decision process neuroimaging data can also aid in understanding differences in response between preference elicitation techniques and identifying the use of different decision processes and heuristics during valuation this article surveys the benefits and limitations of using neuroeconomics methods to assess the value of environmental goods and focuses on three examples where neuroeconomics may inform environmental valuation protest responses comparison of hypothetical and consequential choice contexts and the evaluation of environmental attributes and optimization of study design in stated choice experiments neuroeconomics methods offer a foundation for positive collaboration between environmental economists and cognitive neuroscientists yielding metrics that complement and augment current stated preference methods of determining environmental valuation

evaluating the validity of the dichotomous choice question format in contingent valuation hypothetical and actual cash willingness to pay wtp for an art print were elicited with dichotomous choice and open ended question formats comparing hypothetical and actual dichotomous choice responses using both a likelihood ratio test and the method of convolutions suggests we reject equality at the 0 05 but not the 0 01 level hypothetical wtp was roughly two times actual wtp with the dichotomous choice format there were no significant differences between the open ended and dichotomous choice question formats when both were used to estimate hypothetical wtp or both used to estimate actual wtp

the importance of taste in experimental auctions consumers valuation of calorie and sweetener labeling of soft drinks a majority of purchases that consumers make are classified as repeat purchases one of the main reasons why consumers make repeat food purchases is the food s taste therefore we examined the importance of including taste testing in nonhypothetical experimental auctions specifically we used two experiments to determine consumers willingness to pay for soft drinks labeled with different calorie and sweetener information in experiment 1 participants tasted the soft drinks prior to the bidding rounds in experiment 2 participants did not taste the soft drinks prior to the bidding rounds bidding behavior for the soft drinks was significantly different between experiment 1 and experiment 2 results suggest that including taste testing in the design of experimental auctions is important to accurately capture consumers willingness to pay for foods that are purchased repeatedly results also imply that policies aimed at combating obesity by making the calorie content of foods more visible may not produce desired outcomes

convergent validity of revealed and stated recreation behavior with quality change a comparison of multiple and single site demands we consider the convergent validity of several demand models using beach recreation data two models employ multiple site data a count data demand system model and the kuhn tucker demand system model we explore the role of existing variation in beach width in explaining trip choices and analyze a hypothetical 100 foot increase in beach width we compare these models to a single equation model where we jointly estimate revealed and stated preference trip data and focus on a hypothetical scenario considering a 100 foot increase in beach width in each case we develop estimates of the change in beach visits and the welfare impacts from the increase in width the trip change estimates from two of the three models are similar and convergent valid though the willingness to pay estimates differ in magnitude

the deadweight loss of christmas when economists comment on holiday gift giving it is usually to condone the healthy effect of spending on the macroeconomy however an important feature of gift giving is that consumption choices are made by someone other than the final consumer a potentially important microeconomic aspect of gift giving is that gifts may be mismatched with the recipients preferences in the standard microeconomic framework of consumer choice the best a gift giver can do with say 10 is to duplicate the choice that the recipient would have made while it is possible for a giver to choose a gift which the recipient ultimately values above its price for example if the recipient is not perfectly informed it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash in short gift giving is a potential source of deadweight loss this paper gives estimates of the deadweight loss of holiday gift giving based on surveys given to yale undergraduates i find that holiday gift giving destroys between 10 percent and a third of the value of gifts while these recipients may be unrepresentative of the u s population their gifts are not necessarily unrepresentative holiday expenditures average 40 billion per year implying that a conservative estimate of the deadweight loss of christmas is a tenth as large as estimates of the deadweight loss of income taxation i also explore how deadweight loss and the tendency to give cash gifts vary with the relationship and age difference between giver and recipient i find that gifts from friends and significant others are most efficient while noncash gifts from members of the extended family are least efficient and destroy a third of their value i develop a simple expected utility model to explain the decision to give cash as opposed to in kind gifts the data are consistent with the model cash gifts are most common from the sorts of givers whose noncash gifts have the lowest expected value to recipients given their cost and high variability in recipient valuation

social norms morals and self interest as determinants of pro environment behaviours the case of household recycling this paper considers the role which selfish moral and social incentives and pressures play in explaining the extent to which stated choices over pro environment behaviours vary across individuals the empirical context is choices over household waste contracts and recycling actions in poland a theoretical model is used to show how cost based motives and the desire for a positive self and social image combine to determine the utility from alternative choices of recycling behaviour we then describe a discrete choice experiment designed to empirically investigate the effects such drivers have on stated choices a hybrid logit model is used to link statements over attitudes to recycling to choices dealing with a potential endogeneity problem caused by the joint effects of un observables on attitudes and choices we find that a substantial share of our respondents prefer to sort their waste at home rather than in a central sorting facility this preference is associated with a moral intrinsic motivation involving a belief that sorting at home is more thorough than central sorting

voting when money and morals conflict an experimental test of expressive voting abstract moral considerations may matter much in voting because the costs of expressing support for a morally worthy cause may be low in a referendum these costs depend on whether a voter expects to affect the outcome of the referendum to test the low cost theory of expressive voting we experimentally investigate a proposal to tax everyone and to donate tax revenues the analysis of expectations and voting decisions shows that the low cost theory fails to explain voting decisions instead we find that voters tend to approve of the proposal if they expect others to approve too

does realism matter in contingent valuation surveys the importance of stressing the realism or policy relevance of a contingent valuation cv survey is commonly recognized by cv researchers this paper focuses on the relationship between the probability that a subject s response will result in real consequences and the subject s accurate reporting of willingness to pay results from experiments support the argument that efforts to make contingent valuation surveys real are important however our results also suggest that the connection between the survey and the likelihood of a payment must be rather powerful before surveys generate accurate reporting of willingness to pay for a public good

are hypothetical referenda incentive compatible a comment in a recent article in this journal cummings al 1997 offer experimental evidence rejecting the hypothesis that a hypothetical referendum is an incentive compatible mechanism for obtaining the social value of or willingness to pay for changes in the allocation of environmental goods and services while cautions in offering a blanket rejection of hypothetical referenda as a means of measuring economic values on the basis of their findings the authors do suggest that at least in experimental settings respondents appear to behave differently when real money is changing hands wheather hypothetical situations adequately mimic real market situations has been debated in the contigent valuation literature since its inception see cummings brookshire and schulze 1986 cummings et al s finding of incentive incompatibility appears to offer strong evidence for the critics of hypothetical referenda

organizing the health insurance market this paper presents a new approach to organizing universal health insurance first the government divides the entire population into many large groups then the government creates a federal health insurance system healthfed modeled on the federal reserve system to fill the role now played by the benefits office of a large firm the healthfed would create a short menu of alternatives solicit bids for insuring the entire group and price alternatives there would be redistribution between groups and pricing of alterna tives to reflect optimal social insurance principles there would be no connection between health insurance and employment it may seem odd that this presidential address is my first publication in health economics at the time when i might have been working on an alternative address i was chair of an expert panel for the advisory council on social security looking at issues in both retirement income and medical care 2 in the process of this work i have come up with a new approach to organizing universal health insurance that is the subject of this paper before starting on health insurance i will say a few words about a wider context offering what i will say as an example in that setting 3 a great deal of attention has been focused on the exciting issue of reorganizing economies dropping central planning commonly economists from those countries em brace capitalism or more specifically laissez faire competition with an enthusi asm which exceeds that ofwestern economists although not necessarily western businessmen yet laissez faire capitalism has received little serious support in the west for a very long time we all know the fundamental welfare theorem which shows many ways that capitalism can be imperfect we have also seen a growth in discussion and analysis of the many ways governments can mess up resource allocation the real question is the design of arrangements that try to integrate the things that each type of institution does better this is hard for two reasons one is that it is in the realm of second best with many constraints the more the constraints the harder the analysis the second is that we do not have good positive theories of government behavior good examples yes good theories no thus the analysis is more intuitive less theory driven than in our picture of private markets but also in our private market analyses we have been greatly complicating our picture recognizing all sorts of information imperfec tions that affect the way that private markets work so i will present to you a proposal for universal health insurance meant to combine something that

incentive compatibility tests of choice experiment value elicitation questions abstract this paper uses laboratory experiments with induced values to address fundamental issues related to the incentive compatibility of choice experiment value elicitation questions in particular we compare two versus three option choice sets and the effect of using alternative provision rules including one where the outcome is influenced by both participant and regulator votes we find the overall proportion of choices that are inconsistent with induced preferences is rather low however there are more deviations from induced preferences for two option choice sets and for alternatives to a simple plurality vote implementation rule a multinomial probit analysis of choices in tandem with a mixed logit welfare analysis suggests there is a statistically significant but modest degree of bias towards selecting the status quo option

social interactions in high school lessons from an earthquake after an earthquake hit southern italy in 1980 young men from certain towns were exempted from compulsory military service we show that the exemption raised high school graduation rates of boys by more than 2 percentage points we do this by comparing high school graduation rates of young exempt men and older nonexempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake similar comparisons show that graduation rates of young women in the affected areas also increased since in italy women are not subject to the draft the findings suggest the presence of spillover effects jel i21 j13