Mitigating Cost-Vector Effects in Stated Choice Experiments Using Cheap Talk and Opt-Out Reminders

Abstract

The magnitude and range of the cost attribute levels in stated choice experiments have been found to affect willingness to pay (WTP). Such cost-vector effects are of concern for the validity of derived welfare estimates. This study employs a treatment design to investigate whether a cheap talk and opt-out reminder device mitigates cost-vector effects. In a stated choice experiment to value outcomes of marine management in Germany, results show considerable cost-vector effects when the device is not applied. However, cost-vector effects are reduced substantially in another treatment arm where the combined cheap talk and opt-out reminder device is used. Ancillary results demonstrate how the device increases the validity of stated preference responses and resulting welfare measures. The findings suggest that the inexpensive use of this device in stated choice experiments may be an effective way to mitigate potential cost-vector effects at the design stage.