Experimental willingness to pay (WTP) studies can be classified as hypothetical or non-hypothetical. In a hypothetical study, such as conjoint analysis, a subject does not need to make a real economic commitment. In contrast, in a non-hypothetical task such as in experimental auctions, a subject may need to actually buy the product. Subjects in hypothetical studies tend to overstate their true WTP. Consequently, researchers need to correct hypothetical values to obtain reliable WTP estimates. Recently, incentive-aligned and cheap talk approaches have been proposed as ways to correct for hypothetical bias. In a hypothetical task, a cheap talk script explicitly reminds the subject about the hypothetical nature of the task and its expected consequences. In an incentive-aligned task (non-hypothetical), subjects are randomly selected to physically buy the product. The objective of our study is to assess and compare the reduction of hypothetical bias in consumers’ willingness to pay for novel products by applying a generic, short, and neutral cheap talk script in a retail setting. To accomplish this objective, we employ non-hypothetical, hypothetical, and hypothetical with cheap talk treatments in our experimental design. We conducted our experimental retail study using conjoint analysis and open-ended elicitation mechanisms, utilizing Becker DeGroot Marshak (BDM) mechanism for the incentive-aligned treatments. Consistently in both elicitation mechanisms, using seemingly unrelated and random-effect Tobit techniques, we find that our cheap talk script is effective in eliminating the hypothetical bias. As expected, the hypothetical WTP values are significantly higher than the non-hypothetical values but the hypothetical values with cheap talk are not significantly different from incentive-aligned or non-hypothetical estimates. In addition, we find that open-ended estimates are significantly higher than conjoint analysis estimates and that emotions and familiarity can have significant impacts on WTP estimates.

Experimental willingness to pay (WTP) studies can be classified as hypothetical or non-hypothetical. In a hypothetical study, such as conjoint analysis, a subject does not need to make a real economic commitment. In contrast, in a non-hypothetical task such as in experimental auctions, a subject may need to actually buy the product. Subjects in hypothetical studies tend to overstate their true WTP. Consequently, researchers need to correct hypothetical values to obtain reliable WTP estimates. Recently, incentive-aligned and cheap talk approaches have been proposed as ways to correct for hypothetical bias. In a hypothetical task, a cheap talk script explicitly reminds the subject about the hypothetical nature of the task and its expected consequences. In an incentive-aligned task (non-hypothetical), subjects are randomly selected to physically buy the product. The objective of our study is to assess and compare the reduction of hypothetical bias in consumers’ willingness to pay for novel products by applying a generic, short, and neutral cheap talk script in a retail setting. To accomplish this objective, we employ non-hypothetical, hypothetical, and hypothetical with cheap talk treatments in our experimental design. We conducted our experimental retail study using conjoint analysis and open-ended elicitation mechanisms, utilizing Becker DeGroot Marshak (BDM) mechanism for the incentive-aligned treatments. Consistently in both elicitation mechanisms, using seemingly unrelated and random-effect Tobit techniques, we find that our cheap talk script is effective in eliminating the hypothetical bias. As expected, the hypothetical WTP values are significantly higher than the non-hypothetical values but the hypothetical values with cheap talk are not significantly different from incentive-aligned or non-hypothetical estimates. In addition, we find that open-ended estimates are significantly higher than conjoint analysis estimates and that emotions and familiarity can have significant impacts on WTP estimates.