Reducing protest responses by deliberative monetary valuation: Improving the validity of biodiversity valuation

This paper focuses on examining the validity of biodiversity valuation methodologies. The results of a group deliberation technique (deliberative monetary valuation) are compared to those derived from a contingent valuation (CV) survey using the same environmental topic. Evidence is here presented that DMV can address some of the limitations of CV; namely a prevalence for lexicographic preference ordering due to psychological reasons and the lack of a priori or well-formed preferences. Both of these methodological shortcomings can result in protest responses which decrease the external validity of results. It is common environmental valuation methodology practice to exclude protest responses from the analysis on the grounds that they are illegitimate choices, thus the sample and consequently the environmental valuation analysis may become less representative of the population. An advantage of the DMV methodology is that it was found to significantly reduce the rate of protest responses to less than half (from 29% to 13%). Furthermore, DMV significantly increased the proportion of positive bids but not the amounts contributed. In relation to preference formation issues, we suggest rethinking the current practice of the DMV method, and propose dedicating the entire initial discussion session to introducing the good outside of a valuation context.     

Motives behind willingness to pay for improving biodiversity in a water ecosystem: Economics, ethics and social psychology

This paper reports on empirical work extending the standard economic approach to valuation by including psychological and philosophical factors. More specifically a contingent valuation method survey was applied to biodiversity improvement while simultaneously assessing rights based beliefs, consequentialism and the theory of planned behaviour. The latter was assessed using measures of attitudes, subjective norms and perceptions of control over willingness to pay. The results show that standard socio-economic explanatory variables are far inferior to those of social psychology and philosophy, and that these factors offer a better understanding of the motives behind responses to contingent valuation. The implication is that alternative means of measuring an individual's pluralistic values should be taken into account in order to assess the validity and meaning of willingness to pay.     

Economic valuation of species loss in the open sea

Although the oceans cover 70% of the surface of the planet few studies have considered the economic valuation of marine biodiversity, despite the importance of such information for marine management and conservation. This study uses a contingent valuation method to estimate the public's willingness to pay (WTP) to avoid loss in the number of marine species in the waters around the Azores archipelago. We estimated the marginal value associated with increased levels of species loss (10% and 25%) in five marine taxa (mammals, fish, algae, birds and invertebrates) and all marine species considered as a whole, via a face to face survey of residents and visitors to two Azorean islands. The results suggest small but statistically significant differences in the WTP to prevent losses in the different taxa (mammals = fish > birds = invertebrates = algae). The results also suggest a greater WTP to preserve all marine taxa as a whole, than for a series of individual marine taxa. The valuation of the ecosystem and taxa may be influenced by the maritime culture of the respondents, but despite this, the findings challenge the commonly held premise that charismatic taxa have a disproportionately strong influence on WTP, and they provide important insights into human preferences for biodiversity conservation.     

The economic valuation of biodiversity as an abstract good

The notion of an economic valuation of biodiversity raises major philosophical and practical challenges, especially due to the fact that biodiversity is an abstract good. Insights from political philosophy and philosophy of language can help to clarify the reliability and scope of the current economic methods that can be used for the purpose of valuing it. The analogy with another abstract good, justice, indeed shows that thinking about abstract goods is a very specific exercise. If they do not take account of this specificity, applications of hedonic and contingent valuation methods can hardly claim to be relevant to value biodiversity. Rawls' theory of justice provides for the conceptual tools to overcome this problem. A reinterpretation, based on the theory of counterfactuals, allows generalizing this account of justice to outline a theory of thinking about abstract goods. This new framework emphasizes the importance of the institutional context in determining the reliability of thinking about abstract goods. It points toward substantial reforms of the methodology of economic valuation. Specifically, it suggests reinterpreting valuation as a dynamic expressive process, where initial steps aim at reinforcing the reliability of later steps through an institutional transformation and stabilization of preferences for abstract goods.     

Are Internet surveys an alternative to face-to-face interviews in contingent valuation?

Internet is an increasingly popular data collection mode for stated preference research in environmental economics. However, little is known about how this survey mode may influence data quality and welfare estimates. As part of a national contingent valuation (CV) survey estimating willingness to pay (WTP) for biodiversity protection plans, we assign two groups of respondents either to an Internet or face-to-face (in-home) interview mode. Our design aims to better isolate measurement effects from sample composition effects by drawing both samples from the same sample frame. We find little evidence of social desirability bias in the interview setting or satisficing (shortcutting the response process) in the Internet survey. The share of “don't knows”, zeros and protest responses to the WTP question with a payment card is very similar between modes and equality of mean WTP cannot be rejected. Results are fairly encouraging for the use of Internet in CV as stated preferences do not seem to be significantly different or biased compared to face-to-face interviews.     

Preference Structures, Property Rights, and Paired Comparisons

The method of paired comparisons was used to determine the structure of survey participants' value expressions for Australian native forests. The same participants were also surveyed using the contingent valuation method (CVM). Data from the paired comparisons were used to construct preference maps which enabled identification of participants whose value expressions were structurally incompatible with economic welfare theory – in particular, those participants who expressed their values according to lexicographic preferences. For some of these participants, CVM results did not provide appropriate measures of WTP. The surveys also demonstrated the importance of allowing participants' own views on property rights to dictate the valuation context offered.     

The Endowment Effect and Expected Utility

The endowment effect, which is well documented in the contingent valuation literature, alters people's preferences according to a reference point established in an elicitation question. In particular, the utility that people place on a bundle is both a positive function of the quantities of the goods comprising the bundle, and a negative function of any loss (real or hypothetical) that the elicitation question asks them to incur. Biases such as this have lead some to reject the contingent valuation method as a means of quantifying costs and benefits in favour of other methods of preference elicitation such as standard gambles. But, most preference elicitation methods used by economists require people to express their preferences for one good in terms of their willingness to forego some of another good. Consequently, it is reasonable to expect that, and prudent to check whether, an endowment effect is also evident in other methods of preference elicitation such as von Neumann-Morgenstern's standard gambles. Internal inconsistencies in the standard gamble method from the experimental economics literature and from a study into the value of non-fatal road injuries are shown to be evidence that an endowment effect is also at work in standard gambles.     

Researching Preferences,Valuation and Hypothetical Bias

A number of recent papers in environmental economics have focused on the process of researching preferences – agents are uncertain about preferences but with effort may narrow their uncertainty. This issue has arisen in formulating bids in contingent valuation (CV) as well as the debate over the divergence between WTP and WTA. In the context of CV, it has been suggested that the hypothetical nature of the preference elicitation process biases responses. This paper provides both a theoretical model and experimental evidence to contribute to this debate. The model is a model of competitive bidding for a private good with two components that are particularly relevant to the debate. The first component is that bidders are unsure of their own value for the private good but may purchase information about their own value (researching preferences). The second component is that there is a probability that the auction is hypothetical – that the winning bidder will not get the private good and will not pay the winning bid. The experiment tests this theoretical model of bidding equilibrium and analyzes the effects of variations in the parameters (hypotheticalness, information costs and number of agents) on the endogenous variables (such as the proportion of bidders who become informed and the winning bid). Experimental results suggest that an increase in the hypotheticalness of an auction tends to decrease the likelihood that bidders pay for information on their valuation with an ambiguous effect on the winning bid.      

Bound and path effects in double and triple bounded dichotomous choice contingent valuation

Dichotomous choice contingent valuation questions are relatively inefficient in that large sample sizes are required for a given level of estimation precision. An increasingly common approach to this problem is to supplement the initial question with subsequent dichotomous choice questions in a multiple-bound design. However, a number of commentators have suggested that such designs may generate responses which are internally inconsistent in that the distribution of underlying preferences implied by answers to the initial question may not be the same as that implied by the entire sequence of replies. We consider a variety of potential causes of such inconsistencies and use data from a contingent valuation study with two follow-ups and post survey debriefing focus groups to test both the effects caused by moving from one bound to another and those caused when respondents follow either the bid-increasing path generated by a positive response at a given bid amount, or the bid-decreasing path generated by negative responses. Results indicate that both bound and path effects are significant and generate a pattern corresponding to certain of the causes of inconsistency identified in the paper. Conclusions for the future application of such designs are presented.     

The impact of the bird flu on public willingness to pay for the protection of migratory birds

In this paper, we present the results of a unique time series analysis of contingent values and models for migratory bird protection based on an identical contingent valuation (CV) survey carried out over a three year time period since the first bird flu outbreak in 2003. Although there exists no scientific evidence for a direct relationship, migratory birds are believed to play an important role in spreading the bird flu virus worldwide. The time series analysis allows us to test the temporal stability of stated preferences for migratory bird protection and at the same time examine indirectly the possible impact of increased media attention and public awareness levels regarding the bird flu. We test the impact of the bird flu on public willingness to pay (WTP) for migratory bird protection in the final 2005 survey whilst accounting for procedural variance introduced by sequencing and question ordering-effects, but we are unable to demonstrate a direct negative relationship. A novelty of the study presented here is that respondents in the CV surveys are given the opportunity to pay an annual money amount or a one-time-off lump-sum. Annual WTP values appear to be significantly higher than one-time-off WTP values, suggesting a negative implicit discount rate. Self-selection bias is an important reason for the observed differences. We find that respondents who agree to pay annually differ significantly from respondents who wish to pay a lump-sum in terms of their underlying preferences and motivations towards migratory bird protection.