I aim to describe a new problem with contingent valuation studies, and to suggest the nature and severity of the difficulties in surmounting it.1 The source of the problem, in brief, is category-bound thinking. When people explore particular problems in isolation, they normalize them by comparing them to a cognitively accessible comparison set, consisting of cases from the same basic category.
The incoherence produced by category-bound thinking is illustrated by an experimental study of punitive damages and contingent valuation. We also show how category-bound thinking and the translation problem combine to produce anomalies in administrative penalties. The underlying phenomena have large implications for many topics in law, including jury behavior, the valuation of public goods, punitive damages, criminal sentencing, and civil fines.
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