Why do people non-demand reveal in hypothetical double referenda for public goods?

Abstract

Hypothetical contingent valuation surveys used to elicit values for environmental and other public goods often employ variants of the referendum mechanism due to the cognitive simplicity and familiarity of respondents with this voting format. One variant, the double referendum mechanism, requires respondents to state twice how they would vote for a given policy proposal given their cost of the good. Data from these surveys often exhibit anomalies inconsistent with standard economic models of consumer preferences. There are a number of published explanations for these anomalies, mostly focusing on problems with the second vote. This article investigates which aspects of the hypothetical task affect the degree of nondemand revelation and takes an individual-based approach to identifying people most likely to non-demand reveal. A clear profile emerges from our model of a person who faces a negative surplus i.e. a net loss in the second vote and invokes non self-interested, non financial motivations during the decision process.

Notes

¹ There is a trend to assert that respondents may treat contingent valuation surveys as advisory, rather than inconsequential (after Carson et al., 1999). Unless this is proven, we take the view that at least some respondents will treat the exercise as truly hypothetical (which may vary from a large majority to a small minority, depending on the survey). As such, this article relates to these respondents and not all respondents to a CV survey.

² Weekly cadet take-home pay ranges from $65 to $100.

³ Content analysis is a method of counting the occurrence of certain concepts within a piece of qualitative data. This is a robust form of analysis that allows qualitative factors to be quantified and counted in a reliable and objective manner. The aim of this technique is not to capture all available information but rather to capture the key points from the data. It is possible to isolate concepts from the data and to assess their importance in generating the observed responses. Applying this analysis to the subjects’ written responses provides a set of codes, which can be used to test which heuristics demand revealing and nondemand revealing subjects used to explain their voting in the referendum.

⁴ Our coding scheme can be considered reliable. To generate our reliability statistic (kappa), we use Fleiss and Cuzick's (1979) extension of the Cohen kappa method for three or more coders with two possible responses per coder (technical validation is in Fleiss, 1981). Statistically highly significant z-tests for all codes indicate that we reject the null hypotheses that the ratings are independent (i.e. kappa = 0) and conclude that agreement is better than one would expect by chance. Kappa's for the codes reported herein range from 0.61 to 0.95 with 50% in the ‘good’ category and 50% in the ‘very good’ category using Landis and Koch's (1977) five point scale ranging from <0.2 = poor to >0.81 = very good.

⁵ Twenty-eight subject questionnaires were drawn as a stratified random sample from the 144 total to develop the coding frame. These are not included in the final analysis in order to comply with the independence criterion (Krippendorf 1980). This left 116 questionnaires for the subsequent analysis.