The role of incentives in contingent valuation surveys

A fundamental problem of survey based environmental valuation methods like the contingent valuation method (CVM) is their hypothetical nature which can induce respondents to misrepresent individual preferences. A thorough specification of the hypothetical market, in which survey respondents are asked to state their individual willingness-to-pay, is therefore a prerequisite for obtaining meaningful survey results. This study includes a comprehensive analysis of incentives in CVM surveys making use of insights gained from mechanism design theory. Theoretical incentives resulting from different specifications of the hypothetical market in CVM questionnaires are analyzed and compared to the outcome of an empirical study. It shows that wrong incentives can lead to strongly biased results. This effect can be reduced by the application of consequential and incentive compatible mechanisms.