Abstract
Bid design in dichotomous-choice questions is an issue of considerable concern and debate. This paper investigates the effect of bid structures on welfare estimates using two pretest distributions (from open-ended and dichotomous-choice questions) and three bid structures (two-bid, five-bid, and multi-bid designs). Both Monte Carlo simulations and responses from a field experiment are used. Results support the growing evidence that yea saying occurs and the problem becomes worse when bids are clustered at discrete bid levels in the upper tail of the distribution. The systematic effect of bids on responses to dichotomous-choice questions reduces the effectiveness of optimal bid designs.
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