Incentive compatibility tests of choice experiment value elicitation questions

This paper uses laboratory experiments with induced values to address fundamental issues related to the incentive compatibility of choice experiment value elicitation questions. In particular, we compare two-versus three-option choice sets and the effect of using alternative provision rules, including one where the outcome is influenced by both participant and "regulator" votes. We find the overall proportion of choices that are inconsistent with induced preferences is rather low. However, there are more deviations from induced preferences for two-option choice sets, and for alternatives to a simple plurality vote implementation rule. A multinomial probit analysis of choices in tandem with a mixed logit welfare analysis suggests there is a statistically significant but modest degree of bias towards selecting the status quo option. (C) 2009 Elsevier Inc. All rights reserved.