Does attribute order influence attribute-information processing in discrete choice experiments?

The existing empirical evidence shows that both contingent valuation and discrete choice experiment (DCE) methods are susceptible to various ordering effects. However, very few studies have analysed attribute-ordering effects in DCEs, and no study has investigated their potential influence on information-processing strategies, such as attribute non-attendance (ANA). This paper tests for attribute-ordering effects and examines whether the order of attributes describing the alternatives affects respondents’ propensity to attend to or ignore an attribute. A split-sample approach is used, where one sample received a DCE version in which the positions of the first and last non-monetary attributes are switched across the sequence of choice tasks compared with the other sample. The results show that attribute order does not affect welfare estimates in a significant way under the standard assumption of full attribute attendance, thus rejecting the notion of procedural bias. However, the welfare estimates for the attributes whose order was reversed and the share of respondents who ignored them differ significantly between the two attribute-ordering treatments once ANA behaviour is accounted for in the estimated choice models. These results highlight the important role of information-processing strategies in the design and evaluation of DCEs.     

Revealing Differences in Willingness to Pay due to the Dimensionality of Stated Choice Designs: An Initial Assessment

Stated choice (SC) methods are now a widely accepted data paradigm in the study of the choice responses of agents. Their popularity has spawned an industry of applications in fields as diverse as transportation, environmental science, health economics and policy, marketing, political science and econometrics. With rare exception, empirical studies have used a single SC design, in which the numbers of attributes, alternatives, choice sets, attribute levels and ranges have been fixed across the entire design. As a consequence the opportunity to investigate the influence of design dimensionality on behavioural response has been denied. Accumulated wisdom has promoted a large number of positions on what design features are specifically challenging for respondents; and although a number of studies have assessed the influence of subsets of design dimensions, there exists no single study (that we are aware of) that has systematically varied all of the main dimensions of SC experiments. This paper reports some initial findings on what influences, in aggregate, specific design configurations have on the mean willingness to pay for specific attributes using a Design of Designs (DoD) SC experiment in which the ‘attributes’ of the design are the design dimensions themselves. The design dimensions that are varied are the number of choice sets presented, the number of alternatives in each choice set, the number of attributes per alternative, the number of levels of each attribute and the range of attribute levels. The empirical evidence, using a sample of respondents in Sydney choosing amongst trip attribute bundles for their car commuting trip, suggests that, within the boundaries of design dimensionality investigated, mean estimates of WTP for travel time savings in the aggregate cover a range that is appropriate for reporting a global mean and a set of meaningful values for sensitivity testing in project appraisal and demand prediction. When these aggregated mean estimates are conditioned on all design dimensions we do not find any systematic differences due to specific design dimensions; however when each design dimension is assessed without controlling for the other dimensions we find evidence to support differences in aggregate mean WTP attributable to the number of attributes per alternative and the number of alternatives in a choice set. Research funded under the Australian Research Council Large Grants Scheme, Grant A00103962.     

Temporal stability of preferences and willingness to pay for natural areas in choice experiments: A test–retest

The main objective of this paper is to test the temporal stability of stated preferences and willingness to pay (WTP) values from a Choice Experiment (CE) in a test–retest. The same group of participants was asked the same choice tasks in an internet-based CE, conducted twice with a time interval of one year without interviewer interference. We examine choice consistency at individual choice task level and transferability of the underlying indirect utility function and associated WTP values. The results show that choices are consistent in 57 percent of the choice occasions. Comparison of the choice models over time shows that the estimated preference and scale parameters are significantly different, suggesting that choice behaviour changed between the two surveys. Differences between marginal WTP estimates for individual choice attributes are statistically significant only at the 10 percent level. However, we show that this can result in significantly different WTP values for policy scenarios. The instability of estimated mean WTP values for different policy scenarios asks for caution when including WTP values in cost-benefit analysis.     

HETEROGENEITY IN WILLINGNESS‐TO‐PAY FOR THEATRE PRODUCTIONS: INDIVIDUAL SPECIFIC WILLINGNESS‐TO‐PAY ESTIMATES FOR THEATRES,SHOWS AND THEIR ATTRIBUTES

This paper investigates people's preferences for live theatre, and heterogeneity in willingness‐to‐pay (WTP). A stated preference discrete choice model estimates utility and WTP for different attributes of theatre productions. Previous studies assumed fixed coefficients across all theatre‐goers. This study allows coefficients of attributes to vary across individuals in the population, providing information on the heterogeneity of tastes. Theatre‐goers' choices are used to estimate individual‐based parameters for a person's tastes in theatre productions. The analysis reveals the heterogeneity of tastes for different types of plays and ticket price; and the significance of ‘reviews’ by critics and ‘word of mouth’ opinions as important variables determining choice.     

Income Treatment Effects in Contingent Valuation: The Case of the Swedish Predator Policy

This paper provides case study evidence on two relevant issues in estimating the relationship between WTP and income using contingent valuation: (1) the choice of income measure; and (2) the modelling choice. Addressing these issues, a sensitivity analysis is performed on a dataset concerning implementation of the Swedish predator policy. The results show that the estimated income-elasticity of WTP varies between 0.12 and 0.40 for the models estimated. The main conclusion drawn from the analysis is that controlling for the number of adults in the household is important for finding a significant income effect, when the household income measure is used. Besides this finding the empirical analysis finds little support for the hypothesis that the choice of income measure and modelling assumptions significantly influence the overall model fit.     

Convergent Validity of Attribute-Based,Choice Questions in Stated-Preference Studies

The application of attribute-based choice questions is well established in the marketing literature, but there are unique aspects of the design that warrant investigation to assess their validity for economic welfare estimation. Three design issues are investigated in this paper: (1) the placement of the monetary stimulus (policy cost to respondents) in the sequence of attributes, (2) the number of policy alternatives respondents are asked to consider in choice questions (two versus three), and (3) the inclusion, versus exclusion, of a status-quo alternative in choice questions. The data used to implement these investigations are from a survey designed to estimate the value Maine residents place on a farmland conservation easement program. Tests of convergent validity indicate that the placement of the monetary stimulus, first versus last in the list of attributes, did not affect estimates of preference parameters, significant differences between questions with three versus two alternatives did occur, and the inclusion/exclusion of a status-quo alternative did not affect preference parameters.     

Bayesian Conjoint Choice Designs for Measuring Willingness to Pay

In this paper, we propose a new criterion for selecting efficient conjoint choice designs when the interest is in quantifying willingness to pay (WTP). The new criterion, which we call the WTP-optimality criterion, is based on the c-optimality criterion which is often used in the optimal experimental design literature. We use a simulation study to evaluate the designs generated using the WTP-optimality criterion and discuss the design of a real-life conjoint experiment from the literature. The results show that the new criterion leads to designs that yield more precise estimates of the WTP than Bayesian D-optimal conjoint choice designs, which are increasingly being seen as the state-of-the-art designs for conjoint choice studies, and to a substantial reduction in the occurrence of unrealistically high WTP estimates.     

An alternative interpretation of multiple bounded WTP data—Certainty dependent payment card intervals

This paper analyzes the multiple bounded format, in which uncertainty is directly incorporated into the WTP question. A new approach for analyzing multiple bounded uncertainty data is presented. The intuition underlying the approach is that uncertain individuals would like to state their WTP as intervals rather than precise values and that the width of the intervals is determined by the degree of uncertainty. The approach is compared to the one applied in Welsh and Poe [Welsh, M., Poe, G.L., 1998. Elicitation effects in contingent valuation: comparisons to a multiple bounded discrete choice approach. Journal of Environmental Economics and Management 36, 170–185] which treats uncertainty by conditioning responses on specific verbal probability statements. We argue that the conditioning approach overestimates mean and median WTP and that conditioning WTP estimates on probability statements like “probably” and “unsure” make them “fuzzy”. To empirically compare the two approaches we use data from 2004 concerning implementation of a predator protection policy in Sweden. Our analysis show that the suggested approach: (1) is more intuitive; (2) better fits the data; (3) estimates mean and median WTP with better precision; (4) is less sensitive to distributional assumptions; and (5) it is better suited for policy analysis.     

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.     

Choice Consistency and Preference Stability in Test-Retests of Discrete Choice Experiment and Open-Ended Willingness to Pay Elicitation Formats

This study tests the temporal stability of preferences, choices and willingness to pay (WTP) values using both discrete choice experiment (DCE) and open-ended (OE) WTP elicitation formats. The same sample is surveyed three times over the course of two years using each time the same choice sets. Choice consistency is positively correlated with choice certainty and choice complexity. The impact of choice complexity fades away in time, most likely as a result of learning and preference refinement. Although the OE WTP values remain stable over a time period of 2 years as in previous stated preference studies, DCE based WTP measures differ significantly, suggesting their use in benefits transfer may be limited.     

Contingent values as implicit contracts: estimating minimum legal willingness to pay for conservation of large carnivores in Sweden

Mean willingness-to-pay (WTP) based on multiple bounded, discrete choice responses from contingent valuation surveys are normally obtained using some kind of parametric estimator. This paper instead exploits the possibility to interpret the response to the discrete-choice question as an implicit contract between the researcher and the respondent, resulting in a minimum legal WTP (MLW) estimator. Never previously used in valuation literature, it is used in this paper to estimate the WTP for the preservation of large carnivores in Sweden, based on a large scale, national survey. Results show that MLW estimates only were 12–19% of the comparable parametric estimates. In keeping with other results in contingent valuation literature, we find that the MLW estimates are positively related to the educational level, income and the fraction of urban population, while negatively related to age. Among the advantages of the MLW estimator is its transparency as well as the fact that it rests on a contractual notion of WTP.      

Willingness-to-pay for urban ecosystem services provision under objective and subjective uncertainty

There is growing concern that failure to acknowledge the risk and uncertainty surrounding ecosystem services (ES) delivery could have adverse effects on support for ES policy intervention in the long run. However, acknowledging risk may reduce support for policy interventions in the short term. In this paper, we sought to determine whether willingness-to-pay (WTP) for urban forest ES in Southampton, UK is affected by objective and subjective uncertainty surrounding ES delivery. We conducted a discrete choice experiment with a split sample design: one with a scenario specifying risky ES outcomes and one where zero risk was implied. Respondents’ subjective certainty surrounding the provision of ES was determined before and after the choice questions. Despite respondents’ risk aversion, introducing an objective likelihood attribute did not reduce WTP compared to the scenario with implied certain ES outcomes. Furthermore, whilst WTP for the overall scheme was found to be adversely affected by the presence of risk around ES outcomes, subjective uncertainty seemed to reduce WTP more than objective probabilities. Our results therefore support the idea that both objective probabilities and subjective uncertainty should be explicitly incorporated in the design of stated preference studies for ES valuation.     

Dealing with Ignored Attributes in Choice Experiments on Valuation of Sweden’s Environmental Quality Objectives

Using a choice experiment, this paper investigates how Swedish citizens value three environmental quality objectives. In addition, a follow-up question is used to investigate whether respondents ignored any attributes when responding. The resulting information is used in model estimation by restricting the individual parameters for the ignored attributes to zero. When taking the shares of respondents who took both the environmental and the cost attributes (52–69% of the respondents) into account, then the WTP for each attribute changes if the respondents who ignored the attributes have a zero WTP. At the same time, we find evidence that not all respondents who claimed to have ignored an attribute really did. However, the most commonly ignored non-monetary attributes always have the lowest rankings in terms of WTP across all three environmental objectives. Thus, our results show that instead of ignoring attributes completely, respondents seem to put less weight on the attributes they claimed to have ignored.     

An evening at the theatre: using choice experiments to model preferences for theatres and theatrical productions

This article examines people's preferences and demand for live theatre. It investigates the preferences for people attending a regional theatre, Northern Stage in Newcastle, in relation to other live theatres they could attend, and in relation to the attributes of theatrical productions and ticket price. It uses a Stated Preference (SP), discrete choice experiment, to assess people's utility and Willingness To Pay (WTP) for the different attributes of theatrical productions. The model assesses the effect of the attributes of plays on choice; and the impact of Socio-Economic (SE) and demographic variables on choice and demand. Results reveal the heterogeneity of theatregoers’ tastes for different types of plays and ticket prices. The models reveal the significance of ‘reviews’ and ‘Word Of Mouth’ (WOM) opinions on plays, as the most important variables determining choice.     

Test–Retest Reliability of Choice Experiments in Environmental Valuation

The paper presents the results of the first test–retest study on choice experiments in environmental valuation. In a survey concerning landscape externalities of onshore wind power in central Germany, respondents answered the same five choice sets at two different points in time. Each choice set comprised three alternatives described by five attributes, and the time interval between the test and the retest was eleven months. The analysis takes place at three different levels, investigating choice consistency at the choice task level and repeatability of the latent construct utility at the level of parametric models as well as at the level of willingness-to-pay estimates. At the choice task level we observed 59?% identical choices. The parametric analysis shows that the test and retest estimates are not equal, even when we control for scale, that is, differences in the error variance. However, comparing the marginal willingness-to-pay estimates among test and retest reveals only a statistically significant difference for one of the attributes. Overall, this indicates a moderate test–retest reliability taking into account that consistency at the choice task level overlooks the stochastic nature of the process underlying discrete choice experiments.     

Willingness to Pay for Car Safety: Evidence from Sweden

This study estimates a marginal willingness to pay (WTP) function for a road-mortality risk reduction. Observed marginal WTP from the Swedish car market is used and found to be positively correlated with the baseline risk of the cars. No statistically significant relationships between examined owner attributes, e.g. wealth and background risk, and marginal WTP are found. When comparing the estimated monetary value of a non-marginal risk reduction derived from the integral of the marginal WTP-function with an estimate based on marginal WTP we find, in line with expectations, that the difference between the estimates is negligible for smaller risk reductions and small, 4–10%, also for relatively large risk reductions.      

Latent preferences and valuation of wetland ecosystem restoration

We employ a latent class choice model to evaluate the effects of alternative ecological characterizations of wetland functions and services on individual preferences, and to determine whether socioeconomic factors and psychometric measures of environmental attitudes can explain differences in individual's preferences and values for wetland restoration. This analysis combines a multiattribute choice model with information on individual's characteristics to evaluate preferences for restoration of the Greater Everglades ecosystem, one of the largest and most comprehensive wetland ecosystem restoration projects. To identify potential endpoints for Everglades restoration, two alternative ecological characterizations of the ecosystem were developed using the familiar distinction between function and structure. Survey data from a representative sample of the general population were used in a split-sample design based on the ecological characterization treatment. Within each subsample, the latent class analysis identified three groups who varied in their preferences for ecosystem restoration and socioeconomic profiles. The ecological characterizations had a significant influence on respondents' preferences and willingness to pay (WTP). The subsample responding to the structural characterization had a significantly larger share of respondents in the group who favored proposed restoration plans than the functional attribute subsample. In both subsamples, the group who favored restoration had a higher WTP for restoration than other groups. The latent class analysis also revealed socioeconomic and attitudinal factors that explain some of the heterogeneity in preferences and WTP within each subsample; this heterogeneity would not be identified with a standard choice model. In the context of Everglades restoration, the results provide a baseline assessment of public support and WTP that suggests an emphasis on structural rather than functional restoration endpoints. The approach described in this article can be used in other policy studies of wetland ecosystems because multiple ecosystem services can be represented within a stated choice survey and differences in preferences and values for these services can be measured.     

Exchange Rules and the Incentive Compatibility of Choice Experiments

The incentive properties of stated-preference surveys continue to be a central debate in the valuation of public goods. The majority of empirical studies have focused on incentive properties of contingent valuation questions in relation to situations where answers have monetary consequences. This research explores the incentive properties of repeated, attribute-based choice questions when subjects are provided with an explicit connection between choices and outcomes. Two market/provision-rules are investigated: a posted-price market and a plurality-rule vote. These two provision rules are contrasted to treatments in which no provision rule is discussed—subjects are simply asked to choose their preferred alternative. These three hypothetical choice treatments are compared with a binding choice treatment. While none of the public good treatments are theoretically incentive compatible, we include a comparison of hypothetical and binding choices for a private-good that is incentive compatible. The private good experiments indicate that marginal willingness to pay (WTP) estimates from the hypothetical treatment are larger, but not statistically different than corresponding estimates in the binding choice treatment. Results for the public good experiments indicate that marginal WTP estimates from the hypothetical treatments are much larger, and statistically different than corresponding estimates in the binding choice treatment. The bias is largest when no provision rule is discussed. The bias is reduced with the inclusion of a provision rule, but surprisingly, there was no difference across provision rule treatments. Overall, our results indicate that choice experiments involving a public good should include a provision rule to reduce bias, but the resulting marginal WTP estimates may still be more biased, on average, than those arising from contingent valuation survey formats.     

Comparison of Internet and interview survey modes when estimating willingness to pay using choice experiments

With the increasing use of the Internet as a survey mode, questions of mode effects and how potential effects influence inferences arise. Using a choice experiment combined with mixed logit estimation, willingness-to-pays (WTPs) for attributes are compared between the Internet mode and the more traditional interview survey mode. The results suggest that there are differences in WTP between the two survey models for three of four attributes. Furthermore, WTPs obtained from the interview survey are larger than the WTPs obtained from the Internet survey, suggesting potential social desirability behaviour by the interview respondents. Internet surveys involving sensitive issues may be desirable because of potential social desirability behaviour.     

Distributional Preferences and the Incidence of Costs and Benefits in Climate Change Policy

We explore the relationship between willingness to pay (WTP) for climate change mitigation and distributional preferences, by which we mean individuals’ opinions about who should be responsible for climate change prevention and whether the share of climate change impacts borne by the poor is a cause for concern. We use 1,770 responses to an online stated preference survey. The domestic costs in our survey’s policy choice scenarios are expressed as a set of randomized shares across four different payment vehicles, and the international cost shares are randomized across four groups of countries. We also elicit respondents’ perceptions of the likely regressivity of climate change impacts under a policy of business-as-usual. WTP is higher when larger cost shares are borne by parties deemed to bear a greater responsibility for mitigation, and when respondents believe (and care) that the impacts of climate change may be borne disproportionately by the world’s poor. That WTP for an environmental policy depends on the distributional consequences of the policy is an unsettling result: efficiency assessments are typically assumed to be separate from equity considerations in most benefit-cost analyses.