Rationality, Tort Reform and Contingent Valuation: A Classroom Experiment in Starting Point Bias

This simple classroom experiment demonstrates the existence of starting point bias. Asked to place a dollar value on a non-market good such as the loss of a limb or the destruction of a wetland, students place a much smaller value on the loss if a small value is first suggested by the questioner while placing a significantly higher value on the loss when a large value is originally suggested. This experiment can be used in theory classes to demonstrate the limits of individual rationality or in applied classes in law or environmental economics in relation to tort reform or contingent valuation.