question begs, then, why would the amount of compensation offered to respondents have no
influence on their decision to trade visibility for lower electric bills?
We propose three possible reasons, one an artifact of the survey design, two grounded in
economic theory. First, it may simply be the case that the compensation levels offered in the
survey were simply not high enough to move respondents to accept the program. The bids were
of necessity bounded by the respondent’s electric bill, and the percentage reductions in the bids
were based on estimates of bill reductions due to deregulation. In effect, the study may have
suffered from being “too realistic”; yet, as a tool to analyze the policy of deregulation, this
realism in vehicle design is necessary. In this case, the results are far more interesting from a
policy perspective than from a methodological perspective. As more states move toward
deregulation, considerations of full costs of the policy will need to incorporate realistic features
in terms of payment vehicles, reasonable reimbursement levels, and appropriate information on
possible changes in air quality/visibility.
A second reason for the behavior of the BID variable coefficient is the uncertainty
hypothesis advanced by Zhao and Kling. In this case, one would expect WTP to be an
underestimate of “true” values while WTA would be an overestimate. This relates to the
uncertainty of the respondent’s value of the good in question or, by extension in this case, the
probability that the policy/contribution would have the desired effect on air quality/visibility.
The third and final reason relates to the Hanemann hypothesis regarding goods with no
good substitutes. In effect, this would be interpreted such that there would be no substitutes for
visibility/air quality, and so respondents simply would not make the trade for money. Analysis of
comments on survey forms indicated that, while we tried to focus attention strictly on visibility in
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