5. Mechanism Design and Policy Applications Early in the development of experimental economics interest emerged in using the lab as a test bed for mechanism design and the examination of public policy questions.The contingent valuation method (CVM) is a hypothetical survey instrument that has been widely used and promoted in the assessment of environmental resource damages. Harrison and Rutstrm discuss the crucial issue of whether there is bias in CVM instruments arising from the fact that both the policy being evaluated and its damage prevention value are hypothetical with weak and distorted private incentives for respondents to accurately reveal their preferences. In these settings the question is whether people overstate their true evaluations. They provide a comprehensive review of a wide range of experiments allowing the existence of hypothetical bias to be determined concluding that the existence of such bias while highly variable is persistent and cannot be ignored in the use of CVM instruments.