The effect of knowledge on the disparity between hypothetical and real willingness to pay

The use of a contingent valuation (CV) method is controversial among econom ists because it is based on hypothetical rather than real economic choices. This paper reports the results of an experiment designed to elicit the rea l and the hypothetical willingness to pay (WTP) for a private good. The eff ect of different settings of knowledge (direct and indirect) of the good on subjects' valuation behaviour are investigated. The findings show that (i) a direct knowledge of the good reduces the observed disparity between hypo thetical and real WTP; and that (ii) different settings of knowledge genera te different perceptions of the characteristics of the good.