Environmental and Resource Economics 23: 105–131, 2002. © 2002 Kluwer Academic Publishers. Printed in the Netherlands. 105 Provision Point Mechanisms and Field Validity Tests of Contingent Valuation GREGORY L. POE 1 , JEREMY E. CLARK 2 , DANIEL RONDEAU 3 and WILLIAM D. SCHULZE 4 1 Cornell University, Ithaca, NY, USA, and Jackson Environment Institute (JEI) and the Centre for Social and Economic Research on the Global Environment (CSERGE), University of East Anglia, Norwich, UK (email: glp2@cornell.edu); 2 University of Canterbury, Christ Church, NZ; 3 University of Victoria, BC, Canada; 4 Cornell University, Ithaca, NY, USA Accepted 5 December 2001 Abstract. Past field validity tests of contingent valuation have relied on voluntary contribution mech- anisms to elicit actual willingness to pay, and may overestimate hypothetical bias because of free riding in the actual contributions. This paper argues that provision point mechanisms are a preferred alternative for field validity tests of contingent valuation because they increase the proportion of demand revealed in cases in which public goods can be provided in a step function. The results of a contingent valuation validity study of participation in a green electricity pricing program that uses a provision point mechanism are reported, and hypothetical open-ended and dichotomous choice responses are compared to actual participation. Calibration of hypothetical responses is also explored. Key words: contingent valuation, experimental economics, provision point mechanism, validity JEL classification: Q20, Q26 1. Introduction A critical issue in environmental economics and public policy is the ability of contingent valuation (CV) to measure “actual” willingness to pay (WTP) for environmental commodities (Arrow et al. 1993). Early field validity research compared hypothetical CV responses with values obtained from auctions and other actual market transactions for familiar private (e.g., strawberries, Dickie et al. 1987) and quasi-public goods (e.g., hunting permits, Bishop and Heberlein 1979). Although subsequent analyses of this data have provided mixed interpretations, this early validity research led some prominent CV researchers to conclude that “the overwhelming weight from simulated market experiments favors the use of contin- gent valuation for estimating willingness to pay” (Bishop and Heberlein 1990). 1 More recent efforts have sought to extend the CV/actual market comparisons to less familiar public goods with large nonuse components: Duffield and Patterson (1992) conducted such comparisons for leasing water rights for threatened trout