Can using logarithms overcome scope insensitivity bias?
Say you perform the following type of psychology experiment:
- You describe an undesirable event to people,
- tell them that X instances of the event can be prevented, and
- ask them what they would be willing to pay in order to prevent those X instances.
- The responses you get (Y) are not even close to being linear with respect to X, but rather
- the responses are roughly logarithmic. That is, X=ABY, or Y=logB(X/A) for some constants A and B.
So does anyone know of an experiment (or real-life situation) where subjects are asked to answer in terms of log(Y) instead of Y? Do such responses show a linear relationship to the corresponding X?