There are two types of calibration for hypothetical bias: internal and external. The internal calibration
procedure uses the sample RDD and NPF survey data and is outlined in Sections 5.2 and 5.3. The
external calibration procedure uses outside information on recent GEP revenues to project future GEP
revenues and then matches them to projected NRP revenues. As a consequence, the external calibration
process adjusts for any remaining hypothetical bias not addressed by the awareness or internal
hypothetical bias adjustments. Based on NPP and GEP revenue figures for 2005, we project that at a
price equal to $65, NRP revenues should be approximately $30 million and $1 million for the RDD and
NPF populations. After adjustments to WTP for awareness bias and internal hypothetical bias, we then
scale the corresponding NRP revenues to match these figures. Because gate revenues are calculated from
NRP revenues, they are automatically calibrated in a similar fashion.
Table 7 presents the magnitudes of all three types of calibration factors. Panel A presents the
projected NRP revenues based on various assumptions about awareness and hypothetical bias in the
relevant populations. Panel B presents total scaling factors and their decomposition into awareness bias,
internal hypothetical bias and external hypothetical bias. In calculating the total bias, the decomposed
terms are multiplied together, rather than added, to be consistent with the multiplicative hypothetical bias
term in equation (9). By decomposing the total bias in a multiplicative fashion, each individual bias term
maintains the interpretation of a ‘scaling factor’.
The scaling factors in Panel B are calculated in a sequential fashion using the revenue projections in
Panel A. First, the scaling factors for awareness bias are calculated by taking the ratio of predicted NRP
revenues at $65 (assuming all households in the population will be made aware of the NRP) to the
predicted NRP revenues at $65 (assuming that households in the population will be aware of the NRP at
the same rate as our sample was aware of the GEP). Second, maintaining the correction for awareness
bias, the internal hypothetical bias scaling factor is calculated by taking the ratio of predicted NRP
revenues at $65 (without a correction for internal hypothetical bias) to predicted NRP revenues at $65
(after scaling WTP by exp(δ)). Finally, the external bias factor is calculated by taking the ratio of
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