Efficiency Gains Afforded by Improved Bid Design versus Follow-up Valuation Questions in Discrete-Choice CV Studies

Abstract

Interval data analysis of CV dis- crete choice responses delivers efficiency gains which must be weighed against the risk of intro- ducing strategic response bias. Efficiency gains are also achievable by improved bid design. We assess these gains on median WTP estimates first in an empirical application, then by means of a Monte Carlo experiment comparing three differ- ent bid designs. Improved, but sub-optimal, bid design delivers comparable gains to those achieved by one and two follow-up questions. The first follow-up captures more than 50% of the efficiency gain provided by a second follow-up. (JEL Q26)