Effects of Cheap Talk on Consumer Willingness‐to‐Pay for Golden Rice

TLDR

A large body of literature suggests willingness‑to‑pay is overstated in hypothetical valuation questions compared to actual payment, and cheap talk has been proposed to eliminate this bias by explaining hypothetical bias to respondents before asking a valuation question. The study investigates the effect of cheap talk on willingness‑to‑pay in a mass mail survey. The study uses a conventional value‑elicitation technique in a mass mail survey to assess this effect. Results show cheap talk reduced willingness‑to‑pay for most participants, but did not affect knowledgeable consumers, consistent with prior research.

Abstract

A large body of literature suggests willingness‐to‐pay is overstated in hypothetical valuation questions as compared to when actual payment is required. Recently, “cheap talk” has been proposed to eliminate the potential bias in hypothetical valuation questions. Cheap talk refers to process of explaining hypothetical bias to individuals prior to asking a valuation question. This study explores the effect of cheap talk in a mass mail survey using a conventional value elicitation technique. Results indicate that cheap talk was effective at reducing willingness‐to‐pay for most survey participants; however, consistent with previous research, cheap talk did not reduce willingness‐to‐pay for knowledgeable consumers.