Ecosystem Values and Surface Water Protection: Basic Research on the Contingent Valuation Method

R.B. 2006-02This report introduces a new “Voting-BDM” mechanism, which combines the Becker-DeGroot Marschak (BDM) mechanism for private goods with a majority voting rule. We use the Voting- BDM mechanism in an induced value framework to test the effect of pure altruism on the provision of public goods in coercive willingness-to-pay (WTP) and willingness-to-accept (WTA) settings for both gains and losses. Laboratory experiments indicate that with homogeneous induced values, the Voting-BDM mechanism is demand-revealing in both WTP and WTA settings. Consistent with our theoretical model, however, non-paternalistic altruism or fairness concerns appear to influence behavior when induced values are heterogeneous. With induced gains, better-off subjects under-report their WTP and WTA and worse-off subjects over-report their WTP and WTA. The opposite holds true for induced losses