15 Carson and GrovesGraham HD:Users:Graham:Public:GRAHAM'S IMAC JOBS:12830 - EE - BENNETT:M2584 - BENNETT PRINTGraham HD:Users:Graham:Public:GRAHAM'S IMAC JOBS:12830 - EE - BENNETT:M2584 - BENNETT PRINT30015 Incentive and information properties of preference questions: commentary and extensionsRichard T. Carson and Theodore GrovesInTroduCTIonThis chapter is both a commentary on and extension of Carson and Groves (2007) (hereafter CG) The substantial attention the paper has received has been enormously gratifying. reception of CG has largely been positive with little if any substantive criticism directed toward it; and, there are many papers now being presented at conferences that are testing or relying on various aspects of it.our remarks are organized into a series of short sections. The first points out that the main purpose of CG was to extend the revealed pref-erence paradigm to cover some types of survey responses. The second notes that CG provides the theoretical foundation that some critics of contingent valuation (Cv) had argued was missing. The third takes the concepts of ‘hypothetical’ and ‘hypothetical bias’ head on and argues that these concepts are, for the most part, ill- defined or simply wrong and have done enormous damage to clear and careful thinking about the nature of the response to stated preference questions. The fourth examines the properties of cheap talk which is often proposed as a way to reduced hypothetical bias. The fifth provides some elaboration on CG and the issue of how to interpret information extracted from preferences questions. The sixth poses an answer to the often asked question: is a single binary discrete choice (SbC) question always the best elicitation format for a researcher to use? The seventh provides some elaboration on the payment card elicitation format, which in recent years has seen a resurgence. The eighth turns to an examination of some of the properties of the now widely used discrete choice experiment. The ninth considers the usefulness of economic experiments to help determine the perform-ance of preference elicitation formats. The last section addresses the relationship between CG and the behaviouralist critique of neoclassical economics with a focus on the different- answers- to- the- same- underlying- question issue.M2584 - BENNETT PRINT.indd 300 01/03/2011 15:13Incentive and information properties of preference questions 301Graham HD:Users:Graham:Public:GRAHAM'S IMAC JOBS:12830 - EE - BENNETT:M2584 - BENNETT PRINTEXTEndInG THE rEvEalEd PrEFErEnCE ParadIGmThe CG paper has not, of course, quelled objections by some economists to the use of preference information obtained from surveys to place mon-etary values on goods. nor should it have. The paper’s purpose was to suggest economists should think about surveys as a source of ‘revealed’ preference information. as long as the preference information collected in surveys is used by governments and private firms to help make decisions, then people should use the opportunity provided by their survey response to help influence those decisions. In this sense, responses to survey ques-tions meeting the set of conditions CG term ‘consequential’ are no different than any other type of behaviour that economists use to infer information about preferences. one way to view CG is as just another evolutionary step along the path pioneered by bowen (1943) who early on recognized that voting represented economic behaviour with respect to public goods and becker (1978) who saw that the allocation of time between activities and even behaviour as intimate as marriage were reflective of underlying utility in the standard sense of neoclassical economics.ProvIdInG a THEorETICal FramEWorkCarson and Groves (2007) provide the underlying theoretical framework that Cummings and Harrison (1994, pp. 115–17) correctly pointed out was missing with respect to the use of the contingent valuation method (Cvm):There exists no theory that relates to individual valuation behavior in markets or referendums under conditions in which the good being purchased or the issue on which people are to vote is hypothetical and implied economic com-mitments are hypothetical. Therefore, as a theoretical basis for applications of the Cvm, one must presume that the received economic theory of individual behavior in markets where real economic commitments are made, or the major-ity rule principle derived in social choice theory, is relevant for the hypothetical context of the Cvm. The consistency of people’s valuation behavior in the Cvm with that assumed in value theory or the majority rule principle is, of course, an empirical question. unfortunately, there does not currently exist a body of empirical evidence that might establish this consistency in any compel-ling way. Thus there exists no basis for drawing unequivocal conclusions as to the theoretical substance of values derived with the Cvm.Carson and Groves (2007) provide this theoretical foundation by first dividing questions into two types, consequential and inconsequential. For a question to be consequential, survey respondents need to believe, M2584 - BENNETT PRINT.indd 301 01/03/2011 15:13302 The international handbook on non- market environmental valuationGraham HD:Users:Graham:Public:GRAHAM'S IMAC JOBS:12830 - EE - BENNETT:M2584 - BENNETT PRINTGraham HD:Users:Graham:Public:GRAHAM'S IMAC JOBS:12830 - EE - BENNETT:M2584 - BENNETT PRINTat least probabilistically, that their responses to the survey may influence some decision they care about. For consequential survey questions, neo-classical economic theory is relevant in terms of the incentives respond-ents face in answering the question. Fortunately, most Cv surveys fall into this category, as they usually ask about something the respondent cares about (even if it is only the possibility of increased taxes) and are clearly intended to be used as an input to some decision making process. We contend that it is implausible to believe that someone would go to the expense of conducting a survey if it were clearly a priori that the agency was going to ignore the information it supplies. Inconsequential questions are those for which there is either no chance of influencing a government or firm decision and/or when utility is