This study examines how behavior in inter-group contests is altered when players have incomplete information on their opponent. We model a Tullock contest where there are two possible types of groups that are heterogeneous in the incentives they face, and players only know the probability their opponent is a particular group type. Relative to a contest with complete information, we find theoretically that incomplete information lowers cumulative effort in (even) contests between groups of the same type, whereas it increases contest-level effort in uneven contests. Using experiments, we compare three sources of heterogeneity – differences in cost-of-effort, prize value, and group size. For the cost and value treatments, we find that incomplete information increases effort in uneven contests but has no effect on average in even contests. Group-level effort is higher in group size treatments, but incomplete information does not systematically alter effort. Heterogeneity in the importance of behavioral motivations (non-monetary utility of winning and in-group altruism) along with indicators of cognitive ability help explain patterns in the data.
Are we doing more harm than good? Hypothetical bias reduction techniques in potentially consequential survey settings
Despite the widespread use of stated preference surveys for valuing public policies, there remains a serious concern over hypothetical bias. Various procedures for reducing hypothetical bias have been validated in laboratory experiments, and are now commonly used in field surveys designed to inform public decision-making. However, evidence suggests that most but not all survey respondents perceive that their choices will influence policy and that they will bear the costs of the policy, i.e., they view the survey as “consequential” and not “hypothetical”. This raises the questions of whether popular bias reduction procedures may unduly distort the preferences of those who do not view the survey as hypothetical, and whether various rules of thumb from laboratory experiments (e.g., how to calibrate responses) represent sound recommendations. With these questions in mind, we test two bias reduction procedures – the honesty oath, and adjustments based on stated response uncertainty – in both hypothetical and real payment choice settings. First, we find existence of a significant hypothetical bias which complements prior literature. Second, while on one hand we find that the oath reduces willingness to pay (WTP) in a hypothetical setting, on the other, it has no significant effect in a real setting. Third, we find no significant differences across the stated certainty levels for `yes' responses between hypothetical and real treatments. This evidence rejects the popular hypothesis in this literature that ‘yes’ responses in hypothetical referenda are more uncertain than ‘yes’ votes in financially binding referenda and therefore need to be adjusted. While we find that applying standard certainty correction techniques to the hypothetical choice data reduces estimated WTP, the same is true when we apply the correction to the incentivized treatments. Therefore, in a field survey environment where many perceive that choices are consequential, the use of correction technique may lead to a misrepresentation of actual preferences.
Estimating willingness to pay for wastewater treatment in New Delhi: Contingent Valuation Approach
Given the increasing demand pressure on water resources coupled with supply holdups and institutional failures, fresh-water resources are increasingly susceptible to depletion and add to water stress in India. A vast demand-supply gap necessitates water conservation, including recycling measures. India has a great potential in wastewater treatment, and one of the ways to address it is via decentralization of wastewater treatment given its environmental benefits. This study involves use of a stated preference survey to estimate urban households' willingness to pay for Operation & Maintenance costs of a local Wastewater Treatment Plant (WWTP) supplying treated water for toilet-flushing to residential complexes in Delhi. We find that if freshwater prices rise sufficiently for consumers, they may be willing to subsidize a decentralized WWTP to cover at least the costs of their non-potable water uses. In addition, the co-provision of such public goods can become an important supplement to urban municipal finance.