Construct Validity of Dichotomous and Polychotomous Choice Contingent Valuation Questions

In this note we conduct construct validity tests for dichotomous choice (DC) and polychotomous choice (PC) contingent valuation questions. Contrary to previous results, we find that DC and PC estimates of willingness to pay are theoretically valid, convergent valid, and similar in terms of statistical precision. Similar to previous results, PC respondents are less sensitive to information than DC respondents. We conclude that DC and PC valuation questions are construct valid for this study. Sequential PC valuation questions could be used in studies where obtaining information about the certainty or intensity of respondent preferences would be useful.     

A Bayesian Approach to Double Bounded Contingent Valuation

In this paper we propose a Bayesian approach to model double bounded contingent valuation data. The double bounded elicitation method is interpreted as a two tier iterated process in which the subject is allowed to have a second thought about his/her valuation for the environmental good. Prior information is modelled from the answers to the first dichotomous choice question. The model is Quasi-Bayesian (Q-B) in that the prior distribution refers to mean willingness to pay while the likelihood function refers to the proportions of a multinomial distribution. This model is applied to empirical data from a contingent valuation survey involving the valuation expressed by European tourists for access to natural areas in the Canary Islands. Results show that point estimate of consumer surplus computed with the Q-B model does not differ substantially from single bounded model estimation. In addition, double bounded seems to be quite robust to the choice of the prior model of willingness to pay responses. Comparison with open ended suggests that the Q-B model might be useful to control for strategic response and starting point biases.     

Addressing Negative Willingness to Pay in Dichotomous Choice Contingent Valuation

This paper has four purposes. First, we outline the controversy surroundingthe issue of negative willingness to pay (WTP)in contingent valuation (CV) studies. Second,we use Monte Carlo simulation to examine theperformance of alternative distributionalassumptions in estimating WTP in the presenceof varying proportions of the populationholding negative WTP values. We focus ondichotomous choice CV (DC-CV), where negativeWTP values may be especially difficult todetect. Third, we extend the simulation toinvestigate the performance of the mixturemodels that have recently been proposed forhandling/identifying non-positive WTP values. Fourth, we extend the simulation to investigatethe performance of the nonparametric lowerbound Turnbull approach. Results indicate thatthe relative performance of the DC-CV modelingalternatives evaluated here, which assumepositive WTP, varies across the simulationsetting (e.g., proportion of negative WTP); butnone can be said to reasonably ``solve' theproblem ex post. This underscores theimportance of ex ante efforts to identify ifnegative WTP is likely to be prominent in agiven valuation setting. In such cases,appropriately handling negative WTP must beaddressed through ex ante survey design andmodeling choices that allow negative WTP.     

Provision Point Mechanisms and Field Validity Tests of Contingent Valuation

Past field validity tests of contingent valuation have relied on voluntary contribution mechanisms to elicit actual willingness to pay, and may overestimate hypothetical bias because of free riding in the actual contributions. This paper argues that provision point mechanisms are a preferred alternative for field validity tests of contingent valuation because they increase the proportion of demand revealed in cases in which public goods can be provided in a step function. The results of a contingent valuation validity study of participation in a green electricity pricing program that uses a provision point mechanism are reported, and hypothetical open-ended and dichotomous choice responses are compared to actual participation. Calibration of hypothetical responses is also explored.     

A Learning Design for Reducing Hypothetical Bias in the Contingent Valuation Method

Over the last few years a great deal of research has focussed on hypothetical bias in value estimates obtained with the contingent valuation (CV) method and on means for ameliorating if not eliminating such bias. To date, efforts to eliminate hypothetical bias have relied on calibration techniques or on word-smithing of one kind or another to induce subjects to provide responses to hypothetical questions that mimic responses made by subjects facing actual payments in the valuation experiment. This paper introduces a different approach for eliminating hypothetical bias. A design for a CV survey format is presented which provides subjects with the opportunity to learn how the CV institution works. Sequential referenda are conducted where respondents gain experience in CV settings by participating in both hypothetical and real referenda. The logic of this Learning Design is a straightforward application of the trials process used in experimental economics. We demonstrate that the Learning Design is effective in eliminating hypothetical bias in surveys concerning donations to two different public goods.     

Minimising Payment Vehicle Bias in Contingent Valuation Studies

The payment vehicle is a crucial element inapplications of the contingent valuation methodbecause it provides the context for payment. However,in many countries a relative unfamiliarity with theuse of tax levies and referenda can affect theplausibility of payment vehicles and lead to paymentvehicle bias. The most commonly used approach fordetermining whether payment bias exists is to usetests of convergent validity. It is demonstrated thatsimple tests of convergent validity can be ineffectivein diagnosing the existence of payment vehicle bias.Payment vehicle bias is found to occur because ofdifferences in the coverage of payment vehicles anddoubts about payment being one-off. When respondentsare found to be protesting against a particularpayment vehicle, the current state of the art approachis to delete them from the sample. In this paper analternative approach that relies on the recoding ofprotest responses is proposed.     

An Experimental Testing of Anchoring Effects in Discrete Choice Questions

This paper re-examines the openended/dichotomous choice question in the lab. It hasearlier been suggested that the dichotomous choiceformat suffers from anchoring and yea-saying.Comparing actual economic commitments for a privategood with a significant market value, we cannot rejectthe null hypothesis of equal WTP for the two formats.We conclude that problems with DC might be due toissues of how the survey is framed, not the DCquestion itself.     

基于条件价值评估法的中国巨灾风险保险模式定量设计——基于网络问卷调查的实证研究

巨灾风险损失经验数据的缺乏使得保险人设计合理的巨灾风险保险模式存在较大困难。基于巨灾风险保险的准公共物品性质,通过网络问卷调查,运用条件价值评估法,从消费者意愿角度对中国巨灾风险保险模式的主要项目进行定量设计,可以克服非寿险常规费率厘定方法的缺陷,对纠正巨灾风险保险市场失灵亦有积极意义。     

Induced-Value Tests of Contingent Valuation Elicitation Mechanisms

Using an induced-value experimental design that varies whether values for a “good” are certain or uncertain and whether payment is real or hypothetical, this study investigates issues of demand revelation, hypothetical bias, and value uncertainty for four elicitation mechanisms used in contingent valuation surveys: dichotomous choice, dichotomous choice with follow-up certainty question, payment card, and multiple-bounded discrete choice. For all elicitation mechanisms, we find no evidence of hypothetical bias: voting decisions do not vary systematically when payment is hypothetical versus when it is real. Under all design conditions we find the fewest deviations between stated and induced values and the strongest evidence of demand revelation with dichotomous choice. Stated uncertainty in dichotomous choice follow-up and multiple-bounded discrete choice questions does correlate with uncertain induced values, but the signal is noisy. We discuss the implications of our findings for the design of contingent valuation surveys.     

Combining Contingent Valuation and Choice Experiments. A Forestry Application in Spain

When many good variants are to be valued, like in several forest management programs which differ in the attribute levels, the Contingent Valuation Method may not be a practical option, given the cost and time involved to value each variant separately. There are at least three alternative procedures in such situations. One (i) is to apply an attribute based valuation method like a Choice Experiment (CE); another (ii) is to conduct a CVM and a CE exercise and estimate a joint model; a third one (iii) is to use the CVM estimates to value a base scenario, and then use the CE results to adjust the CVM estimates for any new different scenario. A numerical simulation and an empirical application to an afforestation program in Spain show that the latter is the procedure that yields closer values to the CVM estimations, followed by (ii).      

Improving the Performance of Contingent Valuation Studies in Developing Countries

This paper discusses three main reasons why so many of the contingentvaluation studies conducted in developing countries are so bad. First,the contingent valuation surveys themselves are often poorly administeredand executed. Second, contingent valuation scenarios are often very poorlycrafted. Third, few CV studies conducted in developing countries aredesigned to test whether some of the key assumptions that the researchermade were the right ones, and whether the results are robust with respectto simple variations in research design and survey method. The paper concludesthat research on stated preference methods in developing countries iscritically important to the successful implementation of these methodsbecause (1) there is no empirical evidence to suggest that rapid,”streamlined” CV surveys yield reliable, accurate results, and (2)there is a significant risk that the current push for cheaper, simplerCV studies could discredit the methodology itself. Moreover, the policydebates to which CV researchers are asked to contribute are often oftremendous importance to the well-being of households in developingcountries. Because the costs of policy mistakes can prove tragic, itis critical that VC researchers push for excellence in this researchenterprise and that funding agencies think more carefully about thevalue of policy-relevant information in the fields in which thecontingent valuation method is being used to study household preferencesand behavior (e.g., water and sanitation services, urban air pollution,soil erosion, deforestation, biodiversity, watershed management,ecosystem valuation, vaccines for the poor).     

Implications of Bid Design and Willingness-To-Pay Distribution for Starting Point Bias in Double-Bounded Dichotomous Choice Contingent Valuation Surveys

We examine starting point bias in double-bounded dichotomous choice contingent valuation surveys. We investigate (1) the seriousness of the biases for the location and scale parameters of the willingness-to-pay (WTP) in the presence of starting point bias; (2) whether or not these biases depend on the distribution of WTP and on the bid design; and (3) how well a commonly used diagnostic for starting point bias—a test of the null that bid set dummies entered in the right-hand side of the WTP model are jointly equal to zero—performs under various circumstances. Monte Carlo simulations suggest that the effect of ignoring starting point bias depends on the bid design and on the true distribution of WTP. A well-balanced, symmetric bid design may result in very modest biases even when the anchoring mechanism is very strong. The power of bid set dummies in detecting starting point bias is low. They tend to account for misspecifications in the distribution assumed by the researcher for the latent WTP, rather than capturing the presence of starting point bias.     

The Effect of Respondent Experience/Knowledge in the Elicitation of Contingent Values: An Investigation of Convergent Validity,Procedural Invariance and Reliability

Tests of convergent validity and procedural invariance were used to investigate whether individuals lacking direct experience with a commodity can provide valid responses to contingent-valuation questions eliciting ex post use values. Convergent validity between samples with and without experience was shown to hold for dichotomous-choice responses, but not for open-ended responses.     

The Economic Value of Air-Pollution-Related Health Risks in China: A Contingent Valuation Study

The economic value of preventing adverse health effects related to air pollution is estimated using contingent valuation in three diverse locations in China. Values are estimated for three health endpoints: cold, chronic bronchitis, and fatality. Alternative statistical models are tested to study their impact on estimated willingness to pay (WTP) and on the relationship between WTP and respondent characteristics. Using the official exchange rate, the sample-average median WTP to prevent an episode of cold ranges between US$3 and US$6, the WTP to prevent a statistical case of chronic bronchitis ranges between US$500 and US$1,000, and the value per statistical life ranges between US$4,000 and US$17,000. Estimated mean values are between two and thirteen times larger. Our estimates are between about 10 and 1,000 times smaller than estimates for the US and Taiwan using official exchange rates. Indoor air quality, measured for a subset of respondents, shows no consistent relationship with WTP.