Testing for consistency in willingness to pay experiments

Given the increased use of willingness to pay (WTP) experiments to elicit the economic value of goods, it is becoming increasingly important to assess the validity of the instrument. Given the problems of testing for external validity in the absence of market, other methods must be developed to test the validity of WTP responses. This paper develops a simple test of consistency in WTP experiments which is based on the theoretical basis of the technique ± if commodity A is preferred to B, then individuals should be willing to pay more for A than B. The test is applied to elicit womenÕs preferences for two alternative treatments for menorrhagia: conservative treatment versus hysterectomy. Thirty percent of respondents failed the consistency test. Cost-based responses were found to partly explain inconsistent responses. This simple test highlights potential problems when using WTP experiments within a costbene®t analysis framework. Possible solutions to avoid Ôcost-basedÕ WTP responses are suggested. Ó 2000 Elsevier Science B.V. All rights reserved. PsycINFO classi®cation: 3920 JEL classi®cation: C21; C42; C52; D12