Biases
Starting point bias relate to the base price or level of compensation respondents may be given respectively in WTP and WTA bids. This can occur where the investigator offers an opening bid to the respondent. As indicated above in stage four, there are alternative techniques for avoiding this problem, such as the dichotomous bid approach.
Strategic bid bias is possible where a respondent overstates the WTP in the belief that the proposal is simply hypothetical or will go ahead if the bids are high enough and there is no suggestion of payment having to be made. Conversely, an under bid is likely to be made if it is perceived that the project will be undertaken and that payment will have to be made; in this case, the respondent is essentially a free rider. The bias can be overcome if it is posited that all respondent pay the average bid.
Payment vehicle bias can occur over the form of payment; for example, the respondent’ attitude to a direct one, such as an entry fee, or indirect one like a tax or contribution to a capital fund.
Hypothetical bias is possible where respondents’ valuation in a survey differ from those in a real situation. This may be because they have difficult in appreciating accurately the choice being presented to them. The bias may be compounded by insufficient information being giving on the proposal or that it influences the bids made. A misevaluation may occur if the respondent finds the circumstances difficult to relate to or simply fail to take the survey seriously, therefore giving unconsidered answers. The researchers thus need to make the issue and means of dealing with it as realistic as possible.
Misspecification bias is where, in the first two stages, the perceptions of the investigator and the respondent are dynamically opposed.
Mental account bias relates to the proportion of income or wealth that respondent aim to devote to the consumption of environmental goods and service and bids for individual projects that when aggregated exceed their total planned allocation. It is conceivable for a single bid in a CVM investigation to exhaust their entire budget where they feel very strongly about a given environmental issue. Willis and Garrod (1990,1991b,1991c) have extensively examined this bias.
When a respondent appears unable to distinguish between, on the one hand, a WTA payment to be denied one visit to a site and, on the other hand, a WTA payment for permanent removal of the possibility of ever visiting the site, then what is termed the temporal embedding problem arises. Discrepancies between WTP and WTA are likely because of respondent’s perception of the implications of each. It is possible that the WTP is seen as a payment for each occasion when a resource is used over a given time period, whereas WTA is perceived as forgoing for ever the existence of a resources, in which case the compensation for its loss is much higher. It is therefore necessary to try to establish the total environmental perception of individuals.
The WTP and WTA may also be affected by a number of socio-economic variable. For example, wealthy, high income and educational attainment respondents, who are more environmentally aware, are likely to make higher bids for project or the preservation of environmental resources.