A Cautionary Note on Tests for Incentive Incompatibility and Starting-Point Bias

In a recent study by John Whitehead in 2002 (“Incentive Incompatibility and Starting-Point Bias in Iterative Valuation Questions”), he proposes incentive-incompatibility and starting-point-bias tests for iterative willingness-to-pay questions. We show that if restrictions associated with the nature of starting-point bias are not imposed on the estimation, one obtains inconsistent estimates of the structural parameters and may draw inaccurate conclusions regarding the extent of incentive incompatibility and starting-point bias in contingent-valuation survey data.