STRATEGIC OVERBIDDING IN CONTINGENT VALUATION - STATED ECONOMIC VALUEOF PUBLIC-GOODS VARIES ACCORDING TO CONSUMERS EXPECTATIONS OF FUNDINGSOURCE

A long standing concern among practitioners of contingent valuation is strategic responding by respondents. This paper examined one variant of strategic behavior; the overbidding of true value. College students ' maximum willingness to pay for improvements in community living area s was elicited in one of two conditions. Students were told that if th e aggregate of individual valuations of the proposed improvements was greater than the costs of making the improvements, they would be made. Students were further told either: (a) they would be responsible for funding the improvements because tuition would increase or, (b) the co llege would fund the improvements. Results supported the overbidding h ypothesis: respondents who expected the college to pay for the improve ments reported higher willingness to pay than respondents who thought the costs would be paid by students. Conditions when overbidding for p ublic goods is likely and implications for the interpretation of conti ngent valuation are discussed. (C) 1998 Elsevier Science B.V. All righ ts reserved.