Bangladesh Development Studies Vol. XXXVIII, December 2015, No. 4 Anchoring Effect in Context of a Familiar Good: A Case Study of Irrigation Water Supply in Rural India DURBA BISWAS  Literature shows that the presence of anchoring effect invalidates contingent valuation results. However, studies from developing countries have not addressed this phenomenon adequately. In this paper, indication of anchoring effect was tested using results from a contingent valuation exercise for a familiar good – canal irrigation water used by farmers – in a rural region of India. A single bound dichotomous choice question was followed up by a final open-ended question about the respondents’ maximum willingness to pay for improved water supply. Anchoring effect was not detected which is consistent with the argument that familiarity reduces anchoring. Furthermore, validity tested through a scope insensitivity test shows that the estimated economic values are valid. Keywords: Irrigation Water, Contingent Valuation, Anchoring Effect, Construct Validity, Developing Country JEL Classification: Q25, Q51 I. INTRODUCTION The psychological phenomenon of anchoring occurs when individuals use some random number as an anchor to judge the outcome of an uncertain event. Although random, these anchors can lead to systematic errors in the outcome. In a demonstration of anchoring, Tversky and Kahneman (1974) conducted  The author is currently a post doctoral fellow with the Center for Environment and Development, Ashoka Trust for Research in Ecology and the Environment (ATREE) in Bangalore, India. She can be reached at biswas.durba@gmail.com; durba.biswas@atree.org . This paper is a part of the author’s PhD dissertation. The author is thankful to the Institute for Social and Economic Change (ISEC), Bangalore and Malcolm and Elizabeth Adiseshaiah Trust Scholarship for providing funds to carry out the major portion of the research. The author also thank Prof. Vinish Kathuria, Prof. Joyashree Roy, Kaushik Basu, Dr. Sabuj K. Mandal and the anonymous referee for their valuable comments. The usual disclaimers apply.