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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Instrument-Induced Bias in Donation Mechanisms: Evidence from the Field

Bailey Norwood1 / Jayson L Lusk2

1Oklahoma State University,

2Oklahoma State University,

Citation Information: Contributions in Economic Analysis & Policy. Volume 5, Issue 2, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1413, December 2005

Publication History

Published Online:
2005-12-31

Abstract

Eliciting actual donations toward a public good has been proposed as a means of estimating a lower bound to individuals’ compensating surplus, and can be accomplished using mail/phone surveys or field experiments. This study shows that when warm-glow is present, the elicitation instrument decreases the transaction costs of donating. This presents an obstacle to using the donation mechanism. As a remedy, we propose the use of a multi-donation mechanism where subjects can direct their donation to alternative public goods. Results from a field experiment confirm this instrument-induced bias can be large, suggesting field experiment practitioners should seriously consider how their experimental procedures may alter economic behavior.

Keywords: donations; donation mechanism; nonmarket valuation; warm glow

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