An exact relation between willingness to pay and willingness to accept

I present a simple and precise relationship between the willingness-to-pay and the willingness-to-accept, or equivalently between the compensating and equivalent variations following an exogenous welfare change. One can be computed given the other as a function of income.     

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.     

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.     

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.     

Valuing climate protection through willingness to pay for biomass ethanol

This study uses a multi-part, split-sample contingent valuation method (CVM) and fair share (FS) survey to better understand the public's valuation of mitigating global climate change through its willingness to pay for biomass or “cellulosic” ethanol. In addition to a basic CVM question, a related scenario was developed that asked half of the survey respondents to state their fair share cost to lessen a potential food shortage in the next decade, also through the expanded use of cellulosic ethanol. Three alternative biomass feedstocks were assessed: farming residues, forestry residues and paper mill wastes, and municipal solid wastes. Overall a slightly larger proportion of respondents were WTP extra for cellulosic ethanol in the basic CVM scenario than in the FS scenario, though no significant differences were found in the WTP for the different feedstocks. Bid curve lognormal regression results for the two models were similar, supporting the idea that asking a FS rather than a conventional WTP question may be justifiable in some circumstances, such as in cases of a national emergency.     

Household willingness to pay and income pooling: A comment

We demonstrate some problems with Munro 2005 (“Household willingness to pay equals individual willingness to pay if and only if the household income pools”, Economics Letters 88, 227-230). Furthermore, we reconsider income pooling in a slightly changed framework and prove: Income pooling implies that household willingness to pay is equal to minimal individual willingness to pay. The converse is not true.     

The willingness to pay for mortality risk reductions in Mongolia

This paper reports results from a stated preference survey designed to estimate the willingness to pay for mortality risk reductions in Ulaanbaatar, Mongolia. The survey includes both contemporaneous and latent risk reductions of a magnitude typically achievable through clean air policy. The study is one of a series of national studies designed to provide comparable estimates around the world. One goal of this series is to build a more solid bridge for benefits transfer between developed and developing countries. The survey was conducted in winter 2010. Estimates of willingness to pay passed external and internal scope tests. Study results imply a value of statistical life of approximately $500,000 (based on a purchasing power parity exchange rate) for a contemporaneous 5-in-10,000 annual risk reduction.     

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.      

Temporal insensitivity of willingness to pay and implied discount rates

A number of studies have defined and tested the temporal sensitivity of willingness to pay to payment schemes and the resulting implied discount rates for environmental projects. We demonstrate that those studies have imposed restrictive assumptions on the structure of the willingness to pay function and the underlying decision process. We investigate the temporal sensitivity of willingness to pay using a new temporal willingness to pay function applied to a proposed oyster reef restoration program. We find that (1) holding the length of the project constant, the temporal willingness to pay for the project is the same across different payment schemes, (2) temporal willingness to pay does not vary significantly across projects of varying lengths, and (3) estimated discount rates are low relative to previous studies, but vary significantly across payment schemes and project lengths.     

Effect of distance of transportation on willingness to pay for food

Consumers' interest in locally produced foods is increasing. Hence, there is a need to decipher and quantify consumers' desire for local foods and understand the underlying causes of this demand. More specifically, we examine in this paper the issue of distance of transportation and its' impact on consumer preferences. We investigate how consumers' willingness to pay (WTP) for food varies with the distance the food traveled. Results from non-hypothetical second-price auctions indicate that average WTP is falling in distance traveled, indicating a preference for local production. Results also indicate that the marginal value of a mile traveled depends on the type of food studied (apples vs. wine). Socio-demographic characteristics, perceptions of freshness, taste and food safety, as well as support of local economy impact WTP for local foods.     

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.     

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.     

Modeling zero response data from willingness to pay surveys: A semi-parametric estimation

This paper models zero response data from willingness to pay surveys by employing parametric and semi-parametric estimation methods. The result of the specification test indicates the semi-parametric estimation outperforms the parametric estimation significantly.     

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.     

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.     

Bounds on the willingness to pay for non-traded goods: A possibility theorem

This note contains a proof of the following theorem. If an agent's preferences for traded goods are known, and if the quantity of a non-traded good provided him alters his demand for traded goods, then it is possible to place bounds on his willingness to pay for increments in this quantity.     

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     

The role of uncertainty in the relationship between fairness evaluations and willingness to pay

Participants in contingent valuation studies may be uncertain about a number of aspects of the policy and survey context. The uncertainty management model of fairness judgments states that individuals will evaluate a policy in terms of its fairness when they do not know whether they can trust the relevant managing authority or experience uncertainty due to insufficient knowledge of the general issues surrounding the environmental policy. Similarly, some researchers have suggested that, not knowing how to answer WTP questions, participants convey their general attitudes toward the public good rather than report well-defined economic preferences. These contentions were investigated in a sample of 840 residents in four urban catchments across Australia who were interviewed about their WTP for stormwater pollution abatement. Four sources of uncertainty were measured: amount of prior issue-related thought, trustworthiness of the water authority, insufficient scenario information, and WTP response uncertainty. A logistic regression model was estimated in each subsample to test the main effects of the uncertainty sources on WTP as well as their interaction with fairness and proenvironmental attitudes. Results indicated support for the uncertainty management model in only one of the four samples. Similarly, proenvironmental attitudes interacted rarely with uncertainty to a significant level, and in ways that were more complex than hypothesised. It was concluded that uncertain individuals were generally not more likely than other participants to draw on either fairness evaluations or proenvironmental attitudes when making decisions about paying for stormwater pollution abatement.     

Altruistic, egoistic and biospheric values in willingness to pay (WTP) for wildlife

We attempt to measure general attitudes and ethical beliefs towards preservation, as well as the importance of each of the three considered value orientations (biospheric, egoistic and altruistic) in WTP estimates. In the present study, we apply the GAC scale to a contingent valuation exercise for the recovery of the common murre (Uria aalge) in Galicia (Spain). Up to now, only a few studies in the field of environmental and ecological economics have analyzed value orientations under the Environmental Concern (EC) framework, obtaining mixed results. In the present work, we conclude that ethical aspects affect the individuals decision making process, and that value orientations play an important role in the pro-environmental attitude formation. These value orientations affect willingness to pay (WTP) estimates for environmental goods.