The effect of distance on willingness to pay values: a case study of wetlands and salmon in California

Most contingent valuation studies in the literature utilized a pre-determined geographic market area for their sample frame. In other words, they did not include variables that would measure the extent of the geographic areas over which to aggregate willingness to pay. These studies implicitly assumed that the effects of geographic distance were moot; an assumption that could have led to an understatement of the aggregate benefit values computed in these studies. The overall goal of this study was to determine if distance affects willingness to pay for public goods with large non-use values. The data used came from a contingent valuation study regarding the San Joaquin Valley, CA. Respondents were asked about their willingness to pay (WTP) for three proposed programs designed to reduce various environmental problems in the Valley. A logit model was used to examine the effects of geographic distance on respondents' willingness to pay for each of the three programs. Results indicate that distance affected WTP for two of the three programs (wetlands habitat and wildlife, and the wildlife contamination control programs). We calculate the underestimate in benefits if the geographic extent of the public good market is arbitrarily limited to one political jurisdiction.     

A comparison of empirical models used to infer the willingness to pay in contingent valuation

The essence of the contingent valuation method consists of creating a hypothetical market where respondents are asked about their willingness to pay (WTP) for a non-market good. Different empirical models can be formulated to estimate the expected WTP of a sample of respondents and, then, through aggregation, the social valuation of the good is inferred.This paper outlines the relevance of the distributional assumptions when estimating mean WTP. Several parametric and non-parametric methods are discussed and applied to calculate the existence value of a natural space. Results show that WTP is extremely sensitive to the empirical model used.First version received: November 2002 / Final version received: January 2004     

Comorbidities and the willingness to pay for health improvements

We show that the willingness to pay for health improvements increases with the severity and probability of occurrence of comorbidities. This result, which is obtained under mild restrictions on the shape of the utility function, has important implications for cost benefit studies applied to health care. In particular it implies that the discrimination of the elderly, believed to be implicit in cost benefit analysis, is less of a problem than commonly thought.     

Flexible customer willingness to pay for bundled smart home energy products and services

Energy markets are rapidly changing with smarter, connected, more reliable infrastructure and cleaner generation on the supply side, and more choice, greater control and enhanced flexibility for customers. This paper examines willingness to pay for bundled smart home energy products and information services, using data from a set of two discrete choice experiments that were part of a survey by the regional energy provider of upstate New York. To let the data reveal how preferences are distributed in the population, a logit-mixed logit model in willingness-to-pay space and a combination of observed and unobserved preference heterogeneity was specified and fitted. Results show that residents of Tompkins County are willing to pay more than in other counties for residential storage, and that for home energy management there is an important generational divide with millennials being much more likely to perceive the economic value in the smart energy technologies. The flexible logit-mixed logit estimates provide evidence of important heterogeneity in preferences: whereas most of the population has a positive—albeit rather low—valuation of smart energy products and services, there is a considerable percentage of customers with negative perceptions.     

Willingness to pay for environmental goods in Norway: A contingent valuation study with real payment

The study seeks to determine the maximum willingness to pay (MWTP) among a random sample of Norwegians, for membership in the largest environmentalist association in Norway, Norges Naturvernforbund (NNV). The study includes three stages: (1) a contingent valuation study, testing hypothetical MWTP; (2) those whose stated MWTP is at or above the current membership fee are then asked to pay this fee; (3) those individuals who do not pay in stage 2 are interviewed, and asked to consider revising their MWTP statement. The study is seemingly the first of its kind in comparing hypothetical and actual MWTP by typing valuation of a public good (the environment) to the value of a private good (membership of the NNV). The results show a rather poor correspondence between hypothetical and actual MWTP, since only 6 out of 64 who stated that they were willing to pay the membership fee in stage 1, actually paid this voluntarily in stage 2. Possible reasons for this discrepancy are discussed, on the basis of data from the telephone interview in stage 3, and on information gathered in stage 1. The data indicate that a substantial part of this discrepancy is due to MWTP being overstated in stage 1, but that other reasons also are important.     

Endogenous private safety investment and the willingness to pay for mortality risk reductions

When individuals cannot undertake safety-improving expenditures, the effect of an increase in the initial risk on the willingness to pay (WTP) for mortality risk reduction is positive because of the dead-anyway effect. When they can undertake safety-improving expenditures, the effect of an increase in the initial risk is governed by two effects: The dead-anyway effect which is positive and the high-payment effect which is negative. We treat the two types of risk-reducing expenditures, endogenous and exogenous, as inputs in a safety-improving technology function and find conditions that guarantee that the high-payment effect dominates.     

Semi-parametric discrete choice measures of willingness to pay

A semi-parametric discrete choice method is proposed to recover welfare measures from individual choice data. The proposed method is compared with the traditional binary choice models in an application to measure benefits of recreation trips.     

On the willingness to pay to reduce risks of small losses

While willingness to pay is a common concept to measure the benefit gained from a reduction in the probability of loss, it is still questionable how it is linked to risk aversion and risk elimination behaviors, and how it is affected by the presence of an exogenous source of risk. By focusing only on risks of small losses, this article sheds light on these three issues and provides new results on the determinants of the willingness to pay.      

Public willingness to pay for endocrine disrupting chemicals-free labelling policy in Korea

As public interest in health and safety grows, endocrine disrupting chemicals (EDC) have become an inevitable problem in society. One way to reduce the social cost of exposure to EDC is to grant a label certification to eco-friendly products that do not release EDC. The Korean government is considering introducing an EDC-free labelling policy. Therefore, our article tries to examine the public willingness to pay (WTP) for implementing the EDC-free labelling policy in Korea. For this purpose, a contingent valuation survey of 1000 Korean consumers was conducted in 2016. We used a one-and-one-half-bounded dichotomous choice question to elicit the WTP responses from the respondents. The mean of household WTP for the EDC-free labelling policy implementation is estimated to be KRW 2266 (USD 2.05) per year. When we expand the value to the whole country, it amounts to KRW 42.9 billion (USD 38.8 million) per year. These values are statistically meaningful at the 1% level and imply that the EDC-free labelling policy contributes to households’ utility and should be implemented immediately.     

Proportionality of Willingness to Pay to Small Changes in Risk: The Impact of Attitudinal Factors in Scope Tests

Sensitivity (proportionality) of willingness to pay (WTP) to (small) risk changes is often used as a criterion to test for valid measures of economic preferences. In a contingent valuation (CV) study conducted in Austria, 1,005 respondents were asked their WTP for preventing an increase in the risk of being killed in an avalanche of 1/42,500 and 3/42,500 respectively. WTP for the higher variation in risk is significantly greater than WTP for the lower risk change. We find evidence that those respondents who have had personal experience of avalanches in recent years combine the information about future risk increase—as provided in the survey—with the observed number of fatal avalanche accidents in the past. Proportionality of WTP holds if such prior experience is taken into account and if attitudinal factors in scope tests are controlled for. This research was funded by alpS GmbH—Center for Natural Hazard Management, Innsbruck, Austria.     

An estimation of the future demand for portable Internet service in Korea

Portable Internet service (PIS), which refers to wireless Internet service that can be accessed via a portable terminal at every time and at any place, is scheduled to be launched in Korea in early 2006. Thus, both the government and the industry need to obtain quantitative information on the future demand for the service. This study attempts to estimate future demand for the PIS, to analyze the determinants of the demand, and to conduct pre-test-market evaluation of the service. To this end, the dichotomous choice contingent valuation method is employed. On the whole, respondents accepted the contingent market and were willing to contribute a significant amount, on average. This willingness varies according to individual characteristics. Finally, the study discusses the importance of including valuation method in a pre-test-market evaluation of the PIS and presents the implications of the results, such as the mean willingness to pay (WTP) and the effects of individual characteristics and concerns about the service on the WTP.     

Willingness to pay for other species' well-being

Benefit-cost analysis of environmental policies typically focuses on benefits to human health and well-being. For other species, economists have attempted to measure human WTP for changes in the numbers of individuals for different types of wildlife, and to preserve biodiversity. When it comes to humans' WTP for improvements in the quality-of-life for other species, however, the evidence is limited. Morbidity and quality-of-life considerations may be particularly important to the task of valuing non-fatal harm to wildlife in the wake of an environmental disaster. We argue that the other species morbidity-reduction component of WTP should be calculated net of any “outrage” component associated with the cause of the harm. This net WTP is likely to be correlated with the premium that people are willing to pay for chicken products from birds for which the quality-of-life has been enhanced by improved animal welfare measures. This paper uses a conjoint choice stated preference survey to reveal the nature of systematic heterogeneity in preferences for “humanely raised” versus “conventionally raised” chicken. We also use latent class analysis to distinguish between two classes of people—those who are willing to pay a premium for humanely raised chicken, and those who are not.     

The internalization of externalities in the production of electricity: Willingness to pay for the attributes of a policy for renewable energy

This paper investigates the willingness to pay of a sample of residents of Bath, England, for a hypothetical program that promotes the production of renewable energy. Using choice experiments, we assess the preferences of respondents for a policy for the promotion of renewable energy that: (i) contributes to the internalization of the external costs caused by fossil fuel technologies; (ii) affects the short-term security of energy supply; (iii) has an impact on the employment in the energy sector; and (iv) leads to an increase in the electricity bill. Responses to the choice questions show that our respondents are in favour of a policy for renewable energy and that they attach a high value to a policy that brings private and public benefits in terms of climate change and energy security benefits. Our results therefore suggest that consumers are willing to pay a higher price for electricity in order to internalize the external costs in terms of energy security, climate change and air pollution caused by the production of electricity.     

Respondent direct experience and contingent willingness to pay for new commodities: a switching endogenous interval regression analysis

Most environmental economists argue that direct experience with the good being valuated, or with similar goods, is a precondition for providing valid willingness to pay (WTP) responses to contingent valuation questions. Two questions are posed in this article. The first is whether previous use experience of a resource (Séné nature reserve) similar to that being valuated (future nature reserves) and located in the same geographical area (Gulf of Morbihan) impacts on WTP. The second is whether accounting for the endogeneity of direct experience matters in the estimation of WTP. We find that respondents who have not experienced the Séné nature reserve provide value estimates that are statistically comparable to that of respondents who have experienced it. Our assumption is that respondents have acquired sufficient and adequate experience of future nature reserves from the questionnaire that experience obtained by experiencing the Séné nature reserve was not necessary for making a valid value formulation. Hence, aggregation of WTP estimates to obtain a total valuation of the future nature reserves is reasonable over the full target population. In addition, our results show that direct experience is endogenously determined; but controlling for the endogeneity has a marginal effect on WTP estimates.     

Eliciting Willingness to Pay without Bias using Follow-up Certainty Statements: Comparisons between Probably/Definitely and a 10-point Certainty Scale

Correction for hypothetical bias using follow up certainty questions often takes one of two forms: (1) two options, “definitely sure” and “probably sure”, or (2) a 10-point scale with 10 very certain. While both have been successful in eliminating hypothetical bias from estimates of WTP by calibrating based on the certainty of yes responses, little is known about the relationship between the two. The purpose of this paper is to compare the two using data from three field experiments in a private good, dichotomous choice format. We compare four types of yes responses that differ in the criterion used to determine if there is sufficient certainty for a hypothetical yes response to be considered a true yes response. We make several comparisons, but focus on determining which values on the 10-point scale give the same estimates of WTP as “definitely sure” hypothetical yeses and real yeses (actual purchases). Values that produce equivalence are near 10 on the certainty scale.     

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.     

Joint estimation of discount rates and willingness to pay for public goods

We analyze willingness to pay (WTP) for environmental programs whose time periods of benefit and repayment differ, using a net present value framework that identifies parameters of both WTP and personal discount rates. Respondents to a contingent valuation survey focusing on protection of critical habitat buffer zones for the endangered Steller Sea Lion in Alaska were asked their willingness to pay for 1-, 5-, and 15-year repayment periods. We jointly estimate the personal discount rates and WTP via maximum likelihood, and compare with a model assuming a fixed, market discount rate.     

The impact of behavioural risk-reduction interventions on willingness to pay to avoid sexually transmitted infections: a stated preference study of justice-involved youth

Risky health behaviours, such as smoking, drinking and risky sex, are substantial contributors to the U.S. morbidity rates and healthcare costs. While economic models typically regard preferences as stable, a growing literature suggests that information, including how it interacts with intentions and attitudes, plays an important role in unhealthy behaviours. Relatedly, a large health literature demonstrates that theory-based behavioural interventions can successfully change risky behaviour. This study uses the contingent valuation (CV) survey method to investigate the impact of behavioural interventions on a novel outcome measure: the willingness to pay (WTP) to avoid the consequences associated with risky behaviour. Using novel pre- and post-intervention data from Project MARS (Motivating Adolescents to Reduce Sexual Risk), this study estimates the impact of the intervention on elicited WTP to avoid sexually transmitted infections (STIs). It is found that after the intervention, participants’ elicited WTP to avoid STIs were significantly higher, and more sensitive to differences in infection severity. These results suggest that the intervention may affect risky sexual behaviour by changing the perceived value of avoiding the consequences of risky sexual behaviour. Additionally, these findings contribute to an ongoing debate regarding the construct validity of CV studies in health economics.     

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 to control PM2.5 pollution in Jing-Jin-Ji Region,China

This letter aims to study individual willingness to pay (WTP) to mitigate PM_2.5 pollution in the Jing-Jin-Ji region by using contingent valuation method. Our survey indicated that residents in this region were highly concerned about PM_2.5 pollution control and supported PM_2.5 pollution control policies. In this study, a payment card (PC) format is used to elicit residents’ perceived WTP. With a two-part model, we estimate the mean WTP for an 80% reduction of severe PM_2.5 polluting days in this region is 602 CNY a year, approximately accounts for 1% of the GDP per capita. This result indicates an important funding source for the government to control PM_2.5 pollution in the region. In the econometric analysis, the mean WTP is found to significantly relate with income, expense, age and education level. It decreases with income, age and educational level, but increases with expense, and it is higher for females, people who have children, own cars and apartments but lower for those having larger families. By comparing with relevant researches, this letter indicates a strong and ever-increasing WTP for air pollution control among residents in the Jing-Jin-Ji region, China.