Framing for incentive compatibility in choice modelling

Abstract

The incentives that motivate respondents to reveal their preferences truthfully have been a long-standing area of research in the non-market valuation literature. A number of studies have been undertaken to investigate incentive compatibility in nonmarket valuation. Most of these used laboratory environments rather than field surveys (e.g. Carson and Burton, 2008, Harrison, 2007, Lusk and Schroeder, 2004, Racevskis and Lupi, 2008). Only a few studies investigating incentive compatibility have considered multi-attribute public goods with an explicit provision rule in a choice experiment (Carson and Groves, 2007, Collins and Vossler, 2009, Carson and Burton, 2008). The design of a choice modelling study that avoids strategic behaviour has proven particularly difficult because of multiple choices and difficulties in developing a majority voting provision rule. This study investigates the impact of the inclusion of a framing statement for incentive compatibility in a field survey choice modelling study. An incentive compatible statement (provision rule) that sets out to respondents the rule relating to when the good under consideration will be provided was employed. The impact of a provision rule across three alternative choice modelling multiple choice questionnaires was tested by comparing results between split samples with and without a provision rule. Four split samples were used to test the impact of a provision rule on preferences across different communities including local/rural residents and distant/urban residents. A choice modelling analysis that involved a conditional logit model and a random parameter model was used to elicit household willingness to pay for improvements in environmental quality in the Hawkesbury-Nepean catchment. The results of the study show that the inclusion of a provision rule had an effect on preferences in the distant/urban communities. However, the impact of a provision rule in the local/rural community sub-samples was negligible. This study suggests that the impact of a provision rule should be analysed in the context of different community characteristics.