This was created in partnership with Environment for Development
Researchers using stated preference (SP) techniques have increasingly come to rely on what we call “hypothetical baselines.” By the term “hypothetical baseline,” we mean that respondents are provided with a description of a current state, or baseline, but that this baseline is intentionally not the actual state of environmental quality, health, or other baseline condition. The SP researcher then poses a valuation question or choice task that is contingent, not on the existing status quo, but rather on the state of the world described in this new hypothetical baseline. In this paper, we argue that SP researchers have often used hypothetical baselines without carefully considering the cognitive challenges this poses for respondents or the difficulties this practice creates for advising policy makers. We present a simple typology of four types of SP studies, two of which rely on hypothetical baselines, and give six examples of conditions that an SP researcher may change to create a hypothetical baseline. We discuss four main reasons why SP analysts use hypothetical baselines in their research designs, plus some of the risks associated with the use of hypothetical baselines. Finally, we offer guidance for the use of hypothetical baselines in future SP surveys.