Comparing consumers’ preferences and willingness to pay for non-GM oil using a contingent valuation approach

A contingent valuation method is used in this paper to compare Chinese and Japanese consumers’ preferences and willingness to pay for non-GM vegetable oil. An often ignored issue—the scale factor in a discrete choice model—is explicitly considered, and parameter equality for different data sets is formally tested before reaching a conclusion. Results indicate that in these two countries consumers’ attitude factors and demographic traits have significantly different effects on their purchase intentions, and on average, Japanese consumers are willing to pay a much higher premium for non-GM vegetable oil than Chinese consumers.      

A contingent grouping approach for stated preferences

This paper introduces the theoretical and statistical foundations of contingent grouping, a variant of attribute-based stated preference methods, and checks for its implementation difficulty. Respondents are asked to simply group a number of alternatives as better or worse than a baseline or the status quo situation. A Monte Carlo approach shows that it performs statistically better than contingent choice according to the MSE criterion, and worse than contingent ranking, while a case study suggests that contingent grouping is less difficult to answer than contingent ranking. Furthermore, contingent choice shows a greater consistency in preferences with contingent grouping than with contingent ranking.     

The evaluation of river water quality improvements by the contingent valuation method

The results of an application of the Contingent Valuation Method (CVM) to the estimation of the recreational benefits which would result from improvements in river water quality are described. This case study is used as a basis to discuss the wider, generic issues in the application of the CVM: in particular, the problems of defining the population who benefit; the nature of the goods; why they benefit; and the questions of validity and reliability. A series of recommendations both as to appropriate methodological procedures to be adopted in CVM studies are given and as to areas where further theoretical and methodological research is required.     

A multilevel modelling approach to triple-bounded dichotomous choice contingent valuation

The use of dichotomous choice (DC) questions in the elicitation of willingness to pay (WTP) in contingent valuation studies is common practice at the present time. Recent research has shown that double-bounded DC questions provide statistically superior results to single-bounded questions, given an appropriate sampling design. This paper uses a relatively new multilevel modelling technique to analyze a triple-bounded DC design, which in addition includes an initial non-monetary question on whether an individual accepts, in principle, a WTP some unspecified amount. The theoretical basis of the multilevel model used is described, and some of the possibilities of this potentially powerful and versatile technique are discussed. The practical operation of the multilevel model is demonstrated using data from a contingent valuation study conducted in the Norfolk Broads, England, an internationally important wetland resource.     

Correcting for the endogeneity of pro-environment behavioral choices in contingent valuation

In contingent valuation studies, observed behavioral choices often enter as independent variables in the willingness to pay function. However, these variables may be endogenously determined when the error term in the behavioral model is correlated with the error term in the willingness to pay model. We investigate the effects of correcting for the endogeneity of a variable, namely membership status in environmental organizations that proxies unobservable characteristics of the respondents. Jointly modeling the membership variable and the willingness to pay response yields an estimate for the effect of the former that contradicts previous findings but is intuitive and agrees with theoretical expectations.     

Observable preferences for public goods

This paper discusses the circumstances under which it is possible to use the market or aggregate demand functions generated from individual utility maximization to obtain consumers' preferences for certain classes of public goods, and thus obtain the information needed to satisfy the Samuelsonian efficiency conditions for these public goods. The restrictions on the preferences of all consumers which are sufficient to use the aggregate demand function are: (i) there exists a price vector such that the level of public good provisiion is valueless, and (ii) the marginal rate of substitution of the private good price for the level of public good provision is independent of income.     

Can intertemporal choice experiments elicit time preferences for consumption?

The paper considers what can be inferred about experimental subjects’ time preferences for consumption from responses to laboratory tasks involving tradeoffs between sums of money at different dates, if subjects can reschedule consumption spending relative to income in external capital markets. It distinguishes three approaches identifiable in the literature: the straightforward view; the separation view; and the censored data view. It shows that none of these is fully satisfactory and discusses the resulting implications for intertemporal decision-making experiments. JEL Classification C90, C91, D90, D91, D11, D12     

Effect of substitutes in contingent valuation for a private market good

Economic theory predicts a decrease in valuation as the availability of substitutes increases. This paper describes a contingent valuation (CV) survey that investigates the effect of substitutes on valuation of private market goods. Using an approach that compares willingness to pay (WTP) values elicited from a CV question that accounts for substitutes with WTP values elicited from a similar question without substitutes, we find that allowing for substitutes can moderate WTP values. For the item valued in this study, a hamburger sandwich, allowing for substitutes was associated with a reduction of from 10% to 16% in stated values.     

Willingness to pay for a clear night sky: use of the contingent valuation method

This article applies the Contingent Valuation Method (CVM) to the issue of night sky pollution. Light pollution decreases the ability to view a clear, unobstructed night sky. We administered a survey to the students of the Rochester Institute of Technology (RIT) to obtain estimates of Willingness To Pay (WTP) to improve night sky visibility and to prevent deterioration in visibility. This is the first CVM study that attempts to distinguish between these different WTPs. We find that students are willing to pay significantly more for a larger improvement in night sky conditions. We also find significant differences in WTP to improve versus prevent deterioration in night sky conditions.     

Fairness in the contingent valuation of environmental public goods: attitude toward paying for environmental improvements at two levels of scope

Respondents to contingent valuation (CV) surveys give a variety of reasons for not wanting to pay money. This variability is likely to reflect people's attitudes toward paying for the public good change, their attitudes toward paying for public goods in general, and a component that is independent of these attitudes but unique to particular beliefs about paying (e.g. ‘I can't afford to pay’). Negative attitudes toward paying can contribute to an apparent insensitivity to different levels of the same public good. In a telephone survey, northern Wisconsin property owners were asked about their WTP for four environmental public goods (biodiversity, Indian spearfishing, water quality, and wolves) at two levels of scope (part and whole). For water quality and spearfishing, the part was a chain of lakes that was geographically nested within a larger region of lakes. Similarly, the biodiversity whole represented a region comprising the smaller level of the public good. The scope conditions for wolves were quantitatively nested levels of returning 300 and 800 wolves to northern Wisconsin. Respondents’ beliefs about paying for each public good and level of scope were measured in order to test their generality across the different public goods and levels of scope. Negative attitudes toward paying that are general across public goods place restrictions on the use of CV for environmental public goods. However, negative attitudes that are tied to specific environmental public goods suggest that the valuation method might be difficult to implement in these cases only. Moreover, negative attitudes toward paying that are either general or specific may contribute to perfect embedding when they are expressed across different levels of scope for the same public good. Respondents' beliefs about paying for each public good were associated with an attitude toward paying for the respective good and an attitude toward paying for public goods in general at both levels of scope. The general attitude was more explanatory of beliefs about paying for wolf reintroduction and spearfishing than were the specific attitudes. The distribution of beliefs was sensitive to the type of good being valued, but less so to the scope of the public good change. Contingent valuation practitioners should seek improvements in respondents' perceptions of the fairness of the valuation process in order to facilitate citizens' involvement in decisions about environmental public goods. Avenues for future research are proposed and discussed.     

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.     

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     

Keeping up appearances: Motivations for socially desirable responding in contingent valuation interviews

The tendency to give socially desirable rather than true statements of willingness to pay (WTP) is an often reported form of bias in contingent valuation surveys. While previous research on this bias has exclusively focused on the detection of mode effects, the present study directly assesses a respondent's motivation to state WTP in a socially desirable manner. This study tests the effect of three theoretical motivations for socially desirable responding on WTP responses: A general need for social approval, a perceived social norm calling for a high contribution and perceived lack of anonymity of the interview situation. Questions for the empirical assessment of these factors are developed.Results of a valuation study in Southwest China show differing and independent impacts of these factors. While there is no effect of perceived anonymity, need for social approval biases WTP responses upwards but does not influence the general decision to state a positive WTP. It also turns out that rather the fear of losing social status than the striving for higher social approval is the main driver of this bias. Respondents perceiving a social norm for high WTP are more likely to state a positive WTP, but the specific amount is not affected.     

Comparing benefit estimates from travel cost and contingent valuation using confidence intervals for Hicksian welfare measures

An approach to determining whether benefit estimates derived from the travel cost method and contingent valuation method are statistically different is presented. Unlike past comparisons compensating variation is estimated for both methods. Benefit comparisons are made more rigorous by use of confidence intervals which are developed using the same Krinsky and Robb simulation technique for both valution mothods. The techniques are applied to deer hunting in California. While point estimates of benefits from both truncated and untruncated adjusted travel cost methods are lower than the contingent valuation method, the confidence intervals on the untruncated travel cost method do overlap the contingent valution method benefit estimates.     

Competitive politics, simplified heuristics, and preferences for public goods

This paper examines the role of simplified heuristics in the formation of preferences for public goods. Political scientists have suggested that voters use simplified heuristics based on the positions of familiar parties to infer how a proposed policy will affect them and to cast a vote in line with their interests and values. Here, we use a two-stage field-survey experiment to investigate how knowledge of party positions affects policy choices. We followed standard procedures in developing an attribute-based choice experiment on alternative land-use policies in Switzerland. In contrast to the usual formulation, however, the hypothetical costs of the proposed policies were formulated as a percentage change in taxes. The benefit of this formulation relative to the usual absolute money amounts is that the credibility of the (hypothetical) costs for respondents does not depend on respondent income. Furthermore, the formulation allowed us to solicit party positions on the proposed policies. Six out of eight contacted parties provided their positions. We then conducted a split-sample mail survey where we included a table of the party positions with a subsample of the questionnaires. We report six main experimental results. (1) The response rate of the survey was unaffected by the party positions. (2) The proportion of no-choice answers was decreased by forty percent relative to the control. (3) The party information significantly affected the choices directly and in interaction with respondents' general attitudes towards public spending for nature and landscape conservation and thus affected the way how individuals mapped from general attitudes to preferences for specific policies. (4) The information interacted with educational level in only eight out of forty choice sets, suggesting that even the more educated relied on simplified heuristics. (5) Respondents who knew the party positions were more sensitive to the tax attribute. (6) For respondents with medium and higher tax bills, the resulting willingness-to-pay estimates were decreased by a factor of two to ten relative to the control. These findings suggest that the party information helped the respondents to articulate more consistent preferences than in the treatment without the party information.     

Revelation of preferences for public goods: Aggregation by Abelian operations

When the utility functions for the public and private goods are additively separable, in the two-public-alternative situation, a new class of incentive compatible mechanisms is presented, and some of its properties are explored. If there are more than two public alternatives and if the utility functions remain separable according to a generalized addition (called an abelian operation), it is also possible to construct incentive compatible mechanisms. Such mechanisms are similar to those of Groves but they do not involve maximizing a sum of utilities.     

Strategy-proofness versus efficiency for small domains of preferences over public goods

Summary. It has long been known that when agents have von Neumann-Morgenstern preferences over lotteries, there is an incompatibility between strategy-proofness and efficiency (Gibbard, [9]; Hylland, [12]) – a solution satisfying those properties must be dictatorial. We strengthen this result by showing that it follows from the same incompatibility on a series of much smaller domains of preferences. Specifically, we first show the incompatibility to hold on our smallest domain, in which two agents are restricted to have linear preferences over one private good and one public good produced from the private good (Kolm triangle economies). This result then implies the same incompatibility on increasingly larger domains of preferences, ending finally with the class of von Neumann-Morgenstern preferences over lotteries. Received: February 6, 1997; revised version: January 29, 1998     

Heterogeneity in preferences for redistribution and public spending: A cross-country analysis

Political coordination and policy outcomes may be the result not only of the position of the ‘median voter’ in a political scale but also of the heterogeneity of preferences around the median. Depending on the level of government and the type of policy, such heterogeneity may lead to lower public spending and redistribution. We assess this issue empirically by analyzing the relationship between the distribution of preferences for redistribution and the amount of public expenditure at different levels of government and for several types of spending in 23 European countries. Our results suggest a negative and significant correlation between heterogeneity of preferences for redistribution and public spending that is stronger at the local level and for redistributive functions, independent of the median individual's preferences.