Can using logarithms overcome scope insensitivity bias? Answered
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.