REAL AND HYPOTHETICAL WILLINGNESS TO PAY FOR ENVIRONMENTAL PRESERVATION: A NON‐EXPERIMENTAL COMPARISON

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Abstract
The contingent valuation method is often criticised for being grounded in a hypothetical market in which respondents are not actually required to make the contributions they claim to be willing to pay. This paper undertakes a non‐experimental comparison of real and hypothetical donations towards the public good of environmental preservation, based on a carefully defined theoretical framework. Evidence is presented which suggests that the mean hypothetical payment obtained from an open‐ended CV mail survey is likely to be at least four times as high as the real payments that would be collected from a comparable charitable appeal. In addition, it is found that in a hypothetical context people are less likely to opt out of making a donation ‐ however, the donations which are made are on average no larger than those that could be expected in a real payment context. The implication is tentatively that the primary effect of the hypothetical context may be to reduce the extent of extreme free‐riding, as opposed to creating incentives for strategic over‐bidding. These results are subject to a number of significant empirical limitations.