Induced-Value Tests of Contingent Valuation Elicitation Mechanisms

Using an induced-value experimental design that varies whether values for a “good” are certain or uncertain and whether payment is real or hypothetical, this study investigates issues of demand revelation, hypothetical bias, and value uncertainty for four elicitation mechanisms used in contingent valuation surveys: dichotomous choice, dichotomous choice with follow-up certainty question, payment card, and multiple-bounded discrete choice. For all elicitation mechanisms, we find no evidence of hypothetical bias: voting decisions do not vary systematically when payment is hypothetical versus when it is real. Under all design conditions we find the fewest deviations between stated and induced values and the strongest evidence of demand revelation with dichotomous choice. Stated uncertainty in dichotomous choice follow-up and multiple-bounded discrete choice questions does correlate with uncertain induced values, but the signal is noisy. We discuss the implications of our findings for the design of contingent valuation surveys.     

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.     

Preference Anomalies,Preference Elicitation and the Discovered Preference Hypothesis

There is wide-ranging evidence, much of it deriving from economics experiments, of ‘anomalies’ in behaviour that challenge standard preference theories. This paper explores the implications of these anomalies for preference elicitation methods. Because methods that are used to inform public policy, such as contingent valuation, are based on standard preference theories, their validity may be called into question by the anomaly data. However, on a new interpretation, these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments. We explore the evidence for this interpretation and what implications follow for preference elicitation methodology. JEL classifications: C91, D01, D60, D81, D83, H40     

Addressing Negative Willingness to Pay in Dichotomous Choice Contingent Valuation

This paper has four purposes. First, we outline the controversy surroundingthe issue of negative willingness to pay (WTP)in contingent valuation (CV) studies. Second,we use Monte Carlo simulation to examine theperformance of alternative distributionalassumptions in estimating WTP in the presenceof varying proportions of the populationholding negative WTP values. We focus ondichotomous choice CV (DC-CV), where negativeWTP values may be especially difficult todetect. Third, we extend the simulation toinvestigate the performance of the mixturemodels that have recently been proposed forhandling/identifying non-positive WTP values. Fourth, we extend the simulation to investigatethe performance of the nonparametric lowerbound Turnbull approach. Results indicate thatthe relative performance of the DC-CV modelingalternatives evaluated here, which assumepositive WTP, varies across the simulationsetting (e.g., proportion of negative WTP); butnone can be said to reasonably ``solve' theproblem ex post. This underscores theimportance of ex ante efforts to identify ifnegative WTP is likely to be prominent in agiven valuation setting. In such cases,appropriately handling negative WTP must beaddressed through ex ante survey design andmodeling choices that allow negative WTP.     

A Comparison of Willingness to Pay Estimation Techniques From Referendum Questions

Referendum style willingness to pay questions have been used to estimatepassive use values. This referendum question format method may beproblematic for many reasons, including the statistical techniques used toestimate willingness to pay from discrete responses. This paper comparesa number of parametric, semi-nonparametric and nonparametric estimationtechniques using data collected from US households regarding Federalprotection of endangered fish species.The advantages and disadvantagesof the various statistical models used are explored. A hypothesis test forstatistical equality among estimation techniques is performed using ajackknife bootstrapping method. When the equality test is applied, themodeling techniques do show significant differences in some possiblecomparisons, but only those that are nonparamentric. This can lead toconflicting interpretations of what the data show. Resource managers andpolicy analysts need to use caution when interpreting results until anindustry standard can be developed for estimating willingness to pay fromclosed ended questions.     

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.     

Productivity and technical change: the case of Taiwan

This paper analyses productivity growth in 16 of Taiwan's manufacturing industries during the period 1978–1992. The non-parametric Data Envelopment Analysis approach is used to compute Malmquist productivity indexes. These are decomposed into efficiency change and technical change. The latter is further decomposed into an output bias, an input bias and a magnitude component. In addition, the direction of input bias is identified. Empirical results indicate that the sector's TFP increased at a rate of 2.89% per annum, which could be ascribed to a technical progress (2.56%) and an efficiency improvement (0.33%).     

Why Give up Money for the Baltic Sea? – Motives for People's Willingness (or Reluctance) to Pay

A contingent valuation survey about a reduction of the eutrophication of the Baltic Sea provided data about respondents' motives for their answers to the willingness to pay question. A categorization of the motives allowed an identification of protesters against the valuation scenario. The categorization also illustrated that a teleological ethical perspective is not shared by all respondents and that some respondents perceive human indirect use of ecosystems.     

Contingent valuation of inhaled insulin: a Canadian perspective

Summary

The objective of this study was to assess the preference and willingness-to-pay (WTP) for inhaled insulin from a random sample of general public perspective in Ontario, Canada. This was carried out using a mail survey using the contingent valuation method. Significantly more respondents preferred inhaled insulin (n=114) over subcutaneous insulin (n=6; p<0.001). The mean monthly WTP for inhaled insulin was CAN$68.59 ± 44.65 (95% confidence interval CAN$58.87–78.07), significantly more than the average subcutaneous insulin cost in Ontario of CAN$50. The WTP for inhaled insulin in the diabetic subgroup was CAN$98.52 ± 48.57, which is significantly higher than that of the general public (p<0.001). Multiple regression analysis showed a strong association between respondents’ income and diagnosis of diabetes and their WTP for inhaled insulin (p<0.001). Major influencing factors were convenience and household budget. The results of this study suggest that the general public in Ontario prefer inhaled insulin and are willing to pay significantly more per month than the current cost of subcutaneous insulin.     

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.     

An Experimental Validation of Hypothetical WTP for a Recyclable Product

Using a within-subject experiment, we compare hypothetical andreal willingness to pay (WTP) for an improvement in therecyclability of a product. Subjects are faced with a real paymentscenario after they have responded to a hypothetical question.Contrary to most of the results obtained in similar studies, at apopulation level, there are no significant median differencesbetween actual and hypothetical stated values of WTP. However,within-subject comparisons between hypothetical and actual valuesindicate that subjects stating a low (high) hypothetical WTP tendto underestimate (overestimate) the value of their actualcontributions.     

Protest Responses in Contingent Valuation

A significant number of respondents to contingent valuation surveys tend to either state a zero bid, or refuse to state a bid at all, for reasons associated with the process of valuation. These protest responses are routinely removed from contingent valuation samples because it is assumed that they are not indicative of respondents true values. The censoring of protest responses has led to the emergence of a definitional controversy. One view is that the definition of protest responses and the rules for censoring them are dependent on whether the practitioner conceives of the contingent valuation survey as a market or as a referendum. However, what is not acknowledged is the possibility that protest responses and their meaning may vary according to the type of good being valued, the elicitation format, and the interaction between these elements and external factors. This potential renders the development of unambiguous rules for censoring protest responses difficult. Moreover, when willingness to pay is viewed as a behavioural intention, it becomes important to determine what the responses actually mean. This approach does not assume an interpretative position a priori against which the responses should be judged, but seeks to inform an existing understanding which is inadequate.     

Empirical Evidence Showing The Relationships Between Three Approaches for Pollution Control

Willingness to pay models have shown the theoretical relationships between the contingent valuation, cost of illness and the avertive behaviour approaches. In this paper, field survey data are used to compare the relationships between these three approaches and to demonstrate that contingent valuation bids exceed the sum of cost of illness and the avertive behaviour approach estimates. The estimates provide a validity check for CV bids and further support the claim that contingent valuation studies are theoretically consistent.     

Who would pay more for a fragrance-free laundry detergent? How health information affects valuation

Fragrance allergy is a lifelong condition, and the probability of being affected increases with frequent exposure to fragrance. Currently, fragrance-free laundry detergents are not common in supermarkets. We used a contingent valuation among Austrian consumers in a within-respondent treatment to estimate how willingness to pay is influenced by health information. We found that higher income groups have a higher willingness to pay for fragrance-free detergents. Informing consumers about health impacts substantially increases this difference. Our simulation shows that lower-income groups benefit from health information only if low-priced fragrance-free detergents are available on the market.     

Addressing Heterogeneous Preferences Using Parametric Extended Spike Models

Some public programs simultaneously provide a mix of non-rejectable public goods and public bads. Consequently, some individuals would pay for the program, while others might instead need to becompensated. In this paper we estimate twoparametric extended spike models that accountfor positive and negative preferences as wellas indifference for the public good. Weillustrate the models using data on valuationof prescribed burning of underbrush in forests,which reduces the risk of catastrophicwildfires but also produces smoke emissions(the public bad). We compare the two empiricalapproaches to estimate willingness to pay (WTP)for the program and contrast these results withthose obtained from modeling specificationsthat only account for non-negative preferences.Substantial differences in public net benefitswere found between the most flexible parametricextended spike model and the simple spike modelwhere negative responses were coded as zero anda standard binary logit of only positivebidders. The results from the extended spikemodels demonstrated that accounting forindifference and negative values towards thepublic good resulted in substantially lowerwillingness to pay estimates.     

Can Hypothetical Questions Reveal True Values? A Laboratory Comparison of Dichotomous Choice and Open-Ended Contingent Values with Auction Values

Can hypothetical questions reveal true values? An examination of thelaboratory experimental literature examining contingent valuation (CV)lends some support for using open-ended hypothetical willingness to payquestions. However, experimental studies examining dichotomous choicehave found that hypothetical answers overstate demand. Consistent withthe experimental literature, published CV studies comparing open-ended todichotomous choice questions have shown that values from the dichotomouschoice method equal or exceed those of the open-ended method in everycase. This paper presents a series of experiments employing more than 800subjects to test this hypothesis for CV and compares the CV results toactual auction values in a single controlled experimental environment.     

Willingness to Pay to Reduce Mortality Risks: Evidence from a Three-Country Contingent Valuation Study

Valuing a change in the risk of death is a key input into the calculation of the benefits of environmental policies that save lives. Typically such risks are monetized using the Value of a Statistical Life (VSL). Since the majority of the lives saved by environmental policies are those of older persons, there has been much recent debate about whether the VSL should be lower for the elderly to reflect their fewer remaining life years. We conducted a contingent valuation survey in the UK, Italy and France designed to answer this question. The survey was administered in these three countries following a standardized protocol. Our results suggest that the VSL is €1.022 million or €2.264 million, depending on whether we use median or mean WTP. The VSL is not significantly lower for older persons, but is higher for persons who have been admitted to a hospital or emergency room for cardiovascular and respiratory problems. Income is positively and significantly associated with WTP. The income elasticities of the WTP increase gradually with income levels and are between 0.15 and 0.5 for current income levels in EU countries. We use the responses to the WTP questions to estimate the value of an extension in remaining life expectancy. The value of a loss of one year’s life expectancy is €54,000 or €163,000.     

‘Adopt a Hypothetical Pup’: A Count Data Approach to the Valuation of Wildlife

The willingness to pay (WTP) for a coyote conservation program is estimated using a novel payment-vehicle, based on how many ‚problem’ coyotes respondents would be willing to sponsor for a year. This hypothetical scenario mimics an increasingly popular type of actual market. Data from a phone survey conducted in Prince Edward Island are analyzed using count data models that consider different processes explaining zero responses and the level of positive responses. This is particularly important in the case of coyotes, often regarded as an economic bad. Estimates of WTP per coyote per year around $18–$22 and annual WTP per contributor of about $46–$57 are obtained.      

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.     

Using Choice Experiments to Value the Natura 2000 Nature Conservation Programs in Finland

This paper is concerned with the preferences of the Finnish households for a controversial nature conservation program – the European Union's Natura 2000 Network. Since the program was mainly based on biological considerations, it met strong public opinions from different interest groups in Finland. Using the choice experimental method, we attempt to estimate the values that the Finnish households would place on different preservation levels. It is found that the mean willingness to accept for a decrease in the nature preservation area is much greater than the mean willingness to pay for an increase by the same amount. Also, the marginal willingness to pay becomes zero after an initial increase in the natural preservation area, which is consistent with our earlier findings in a binary choice valuation study. Policy implications of these results are also discussed in relation to different decision criteria.