Applying conjoint analysis in economic evaluations: an application to menorrhagia

The increased demand for health care, coupled with limited resources, means that decisions have to be made concerning the allocation of scarce health care resources. This paper considers how conjoint analysis (CA) can be used to aid this decision making process. It is shown how the technique can be used to estimate marginal rates of substitution between attributes, willingness to pay (WTP) if cost is included as an attribute and overall utility scores for different ways of providing a service. The technique is applied to consider women's preferences for two surgical procedures in the treatment of menorrhagia: hysterectomy and conservative surgery. The results suggest conservative surgery is preferred to hysterectomy, as indicated by higher utility scores for the former and a marginal WTP of 7593 to have conservative surgery rather than hysterectomy. The internal validity of CA was also shown. It is concluded that CA is a potentially useful instrument for policy makers. However, numerous methodological issues need addressing before the technique becomes an established instrument within economic evaluations.     

Validity of discrete-choice experiments evidence for health risk reduction

There is growing interest in discrete-choice experiment (DCE) as a method to elicit consumers’ preferences in the health care sector. Increasingly this method is used to determine willingness to pay (WTP) for health-related goods. However, its external validity in the health care domain has not been investigated until now. This paper examines the external validity of DCE concerning the reduction of a health risk. Convergent validity is examined by comparing the value of a statistical life with other preference elicitation techniques, such as revealed preference. Criterion validity is shown by comparing WTP values derived from stated choices in the experiment with those derived from actual choices made by the same individuals. Both tests provide strong evidence in favour of external validity of the DCE method.     

Willingness to pay for publicly-financed health care: how should we use the numbers?

This paper addresses the question of how willingness to pay (WTP) values in health care evaluation can be used by policy makers. The way in which WTP values are used depends on from whom values are elicited and whether the good concerned is privately-financed or publicly-financed through taxation. Thus, four possible uses of WTP values are identified. The focus is on the two uses which arise in the publiclyfinanced situation. ‘Conventional’ use of WTP values, where the decision as to whether or not to provide a service depends upon whether or not WTP values are greater than total cost, applies only in the privately-financed, and not publiclyfinanced situations. The situations with publicly-financed goods are more complex. The use of WTP values for publicly-financed goods is justified and illustrated.     

Willingness to pay for QALY: perspectives and contexts in Japan

Abstract

Objectives: Theoretically, willingness-to-pay (WTP) for quality-adjusted life years (QALY) can vary depending on social and personal preferences and on ex-ante and ex-post settings. However, empirical investigations into the theoretical differences are lacking. In Japan, setting the threshold has been controversial since a pilot project to implement health technology assessments (HTA) launched in 2016. The study aim is to estimate WTP values for one additional QALY from different perspectives, health statuses, and contexts to confirm the difficulty in setting a uniform price threshold using WTP.

Methods: More than 1,000 respondents representing a cross-section of the Japanese population answered each of nine questionnaire decks in an online panel. WTP values were estimated on three different perspectives (personal, social, and socially inclusive) and on two contexts (ex-ante and ex-post). This study primarily used the non-parametric spike model based on double-bounded dichotomous choice (DBDC) settings to obtain the conditional WTP values.

Results: WTP per QALY was higher in the severe health status than in the moderate health status from all perspectives. Respondents from the socially inclusive perspective estimated the highest WTP value for a new drug. Respondents were also asked about life-threatening diseases in ex-post and ex-ante. The WTP value in ex-ante was higher than in ex-post, and demographic factors affecting the WTP were different in both situations. The various WTP values were obtained from these surveys.

Limitations: The analysis was based on data collected from an internet panel, which could be biased. There is also a risk that respondents answered the questionnaire differently if asked in everyday situations.

Conclusion: Use of a uniform price threshold may not be appropriate in policy settings, because it may not reflect diverse preferences based on different situations, such as disease type and severity. Setting a price threshold as Japan institutes an HTA system requires further research.     

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     

Trading Taxes vs. Paying Taxes to Value and Finance Public Environmental Goods

The potential sensitivity of environmentalresource valuation to payment vehicles is ofinterest to researchers and decision-makersinvolved in estimating and applying thesenumbers. A conceptual model is developed whichprovides insight into how the different paymentvehicles of a special tax and a taxreallocation affects the willingness to pay(WTP) for environmental goods. Hypothesistesting using contingent valuation datasuggests WTP with a tax reallocation is higherthan WTP with a special tax for ground waterquality protection in Georgia and Maine, USA.Technical measurement and welfare analysisimplications and limitations of valuing andfinancing public environmental goods using taxrealloactions are discussed.     

Comparing Fuzzy and Probabilistic Approaches to Preference Uncertainty in Non-Market Valuation

In seeking to value environmental amenities and public goods, individuals often have trouble trading off the (vague) good or amenity against a monetary measure. Valuation in these circumstances can best be described as fuzzy in terms of the amenity being valued, perceptions of property rights, and the numbers chosen to reflect values. In this paper, we apply fuzzy logic to contingent valuation, employing a fuzzy clustering approach for incorporating preference uncertainty obtained from a follow-up certainty confidence question. We develop a fuzzy random utility maximization (FRUM) framework where the perceived utility of each individual is fuzzy in the sense that an individual’s utility belongs to each cluster to some degree. The model is then applied to a Swedish survey that elicited residents’ willingness to pay for enhanced forest conservation and to a Canadian survey of agricultural landowners that elicited their willingness to accept compensation for a tree planting program. Both the WTP and WTA measures we obtain using the fuzzy approach are well below those obtained using standard probability methods. Based on goodness of fit measures and Monte Carlo experimentation, a case can be made for using a fuzzy preference approach for modeling preference uncertainty as opposed to incorporating respondent uncertainty within the random utility maximization framework.      

Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals’ “true” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents’ true preferences. This study examines the effect of time framing on respondents’ willingness to pay (WTP) for car safety. We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. Our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications. In our empirical analysis we examine the sensitivity of WTP to an annual and a monthly scenario. Our theoretical model predicts the effect from the time framing to be negligible, but the empirical estimates from the annual scenario are about 70 % higher than estimates from the monthly scenario.     

Joint Estimation of Multiple CVM Scenarios under a Double Bounded Questioning Format

Contingent valuation surveys frequently ask the same respondent for willingness to pay (WTP) for either different programs or different levels of provision of a single program. When multiple scenarios are considered by the respondent, the errors in the estimates of WTP are likely to be correlated across scenarios. Failing to account for correlation may lead to erroneous inferences concerning differences in WTP. This paper presents a technique that can be used to jointly estimate WTP for multiple scenarios proposed within a survey when the double-bounded questioning format is used. Monte Carlo simulations are employed to show that estimates derived from the joint model provide lower parameter variances as well as tighter confidence intervals surrounding WTP. The model is used to estimate WTP values for data collected in telephone interviews of California residents concerning WTP for fire reduction programs in Oregon and California. Variance properties of these estimates are shown to be similar to those estimated using simulated data.     

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.     

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.     

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.     

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.     

Measuring heterogeneity,survey engagement and response quality in preferences for organic products in Nigeria

The identification of the market potentials of organic products is important in the drive towards a sustainable agricultural development in sub-Saharan Africa (SSA). However, available evidence shows that valuing attributes of credence goods (such as organic products) while using stated preference methods faces additional obstacles compared to other normal goods. In this study, we examine consumers’ preferences and willingness-to-pay (WTP) for health and environmental attributes of organic products in Nigeria. We employ an approach that allows us to adequately capture the value of organic products by linking part of the heterogeneity across respondents to differences in scale, while making use of indicators of survey engagement, without risks of endogeneity bias and measurement error that arise from the deterministic methods. The empirical results show that market for organic products exists in Nigeria, with reduction in pesticide residues attribute attracting the highest value, followed by the certification programme. Furthermore, we observe that increases in the latent engagement variable lead to a greater probability of agreement with statements relating to survey understanding and realism, and hence more substantive output.     

Public-good valuation and intra-family allocation

I derive values of marginal changes in a public good for two-person households, measured alternatively by household member i’s willingness to pay (WTP) for the good on behalf of the household, WTP _i (H), or by the sum of individual WTP values across family members, WTP(C). Households are assumed to allocate their resources in efficient Nash bargains over private and common household goods. WTP _i (H) is then defined by trade-offs between the public good and the household good, and WTP(C) by trade-offs of between the public good and private goods. WTP _i (H) is found to be higher (lower) than WTP(C) when member i has a relatively high (low) marginal valuation of the public good, but tends on average to equal WTP(C). As a consequence, individuals tend to represent households correctly on average when questioned about the household’s WTP for a public good, even when they are purely selfish and answer truthfully. Adding all members’ WTP answers on behalf of the household then leads to double counting. Pure and paternalistic altruism (the latter attached to consumption of the public good) move each member’s WTP on behalf of the household closer to the true sum of individual WTP, but only paternalistic altruism raises this sum.      

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.     

The private nonprofit provision of education: A theoretical model and application to Japan

Why do some countries provide education and other quasi-public goods through government production while others rely heavily on the private sector?. When private provision is used, why does the nonprofit organization (NPO) often prevail over the for-profit form? Why do nonprofits concentrate on the provision of quasi-public human capital-enhancing goods, such as education and health care? This paper examines these interrelated questions. Section 2 argues that the relative size of the private (nonprofit) sector is determined by excess demand and differentiated demand for quasi-public goods and by the supply of religious entrepreneurship in the society and industry under examination. Section 3 applies this theoretical model to the case of Japan.     

Economic Valuation of Environmental Damages due to the Prestige Oil Spill in Spain

This paper presents a parametric and non-parametric analysis of data from a contingent valuation study (CVM) conducted to estimate environmental use and passive use losses due to the Prestige oil spill. This is the first CVM study conducted in Europe after a large oil spill. The CVM survey was implemented using in person interviews. Mean willingness to pay (WTP) values were computed with both, a parametric and non-parametric approach. Parametric WTP estimation indicates that respondents in the sample are willing to pay about 40.51 € per household to avoid a similar future oil spill in Spain. This implies that on average, the Spanish society places a value of the environmental losses caused by the Prestige oil spill around 574 € million. Non-parametric estimates are slightly higher at 58.08 € per household. WTP results are similar to those obtained in the Exxon Valdez study.     

Willingness‐to‐pay for parallel private health insurance: evidence from a laboratory experiment

Abstract Debate over the effects of public versus private health care finance persists in both academic and policy circles. This paper presents the results of a revealed preference laboratory experiment that tests how characteristics of the public health system affect a subject's willingness‐to‐pay (WTP) for parallel private health insurance. Consistent with the theoretical predictions of Cuff et al. (2010), subjects’ average WTP is lower and the size of the private insurance sector smaller when the public system allocates health care based on need rather than randomly and when the probability of receiving health care from the public system is high.     

A Semi-parametric Estimator of Willingness-to-pay Applied to Dichotomous Choice Contingent Valuation Data

The use of dichotomous choice questions (Are you willing to pay $x?) has been advocated as superior to open ended questions (What would you be willing to pay?) in contingent valuation studies of non‐market goods. A supplementary dichotomous choice question, raising or lowering the bid price depending on the initial response, gives increased precision. However, a problem with these methods is that identifying the mean willingness to pay (WTP) is more complex, and often conditional on making a distributional assumption. This paper will present a semi‐parametric method for estimating WTP without invoking any such assumptions, using the interval inherent in the double bounded format, and based on estimating the underlying hazard function for the distribution of WTP. An advantage of the approach over other non‐parametric methods is that it allows one to include respondent characteristics as determinants of the individual decisions, and does so within a computationally straightforward framework.