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The Adding-Up Test in an Incentivized Value Elicitation Mechanism: The Role of the Income Effect
- Elbakidze, Levan, Nayga, Rodolfo M., Jr.
- Environmental and resource economics 2018 v.71 no.3 pp. 625-644
- economic analysis, income, mathematics and statistics
- In the context of testing the construct validity of stated preference studies, some researchers advocate the use of an “adding-up test” designed to gauge whether elicited values are sufficiently sensitive to a change in the scope (i.e. size) of a good. Crucial to the applicability of this test in practice, which relies on endowing a subsample of respondents with a good free of charge, is that the income effects due to endowment are negligible. In this study, we apply the adding-up test in an experimental value elicitation format to examine the potential effect of endowment as part of the test design on the adding-up property of elicited values. The results show that the adding-up property can be affected by free provision of part of the bundle.