Abstract

Stated choice surveys, hypothetical or real, have been a valuable tool in eliciting individual preferences for public goods and services for decades. However, the incentive structure of these questions remains to be a potential source of bias in welfare measurements. We have designed a dominant strategy incentive compatible mechanism that removes the incentives to free-ride in real money questions. In a previous research (Das and Anderson, 2007), we discussed a similar incentive compatible mechanism design for a binary choice case and in this paper we extend our theory to a multiple alternative choice case. We prove that in this mechanism truthfully answering the stated choice questions is an individual's dominant strategy. We use experimental tools to verify the model, and also evaluate its performance with respect to alternative demand revelation mechanisms. For our experimental demonstration, we limit the choice set to four choice alternatives. Although, overall our incentive compatible mechanism for multiple alternative choice case perform quite satisfactorily, it fails to perform as well as the binary choice case.

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