Does Question Format Matter? Valuing an Endangered Species

A three-way treatment design is used to compare contingent valuation response formats. Respondents are asked to value an endangered species (the red-cockaded woodpecker) and the restoration of its habitat following a natural disaster. For three question formats (open-ended, payment card, and double-bounded dichotomous choice), differences in survey response rates, item non-response rates, and protest bids are examined. Bootstrap techniques are used to compare means across formats and to explore differences in willingness to pay (WTP) distribution functions. Convergent validity is found in a comparison of mean WTP values, although some differences are apparent in the cumulative distribution functions. Differences across formats are also identified in item non-response rates and proportion of protest bids. Overall, the payment card format exhibits desirable properties relative to the other two formats.     

Consistency and construction in stated WTP for health risk reductions: A novel scope-sensitivity test

A contingent valuation study is conducted to estimate willingness to pay (WTP) for reducing skin cancer risks. A split sample design contrasts dichotomous choice (DC) with open-ended (OE) methods for eliciting WTP. A novel scope test varies the remit of risk reductions from just the individual respondent to their entire household allowing us to examine both the statistical significance and scale of scope sensitivity. While OE responses fail such tests, DC responses pass both forms of testing. We conclude that conformity of the size of scope effects with prior expectations should form a focus for future validity testing.     

An Experimental Testing of Anchoring Effects in Discrete Choice Questions

This paper re-examines the openended/dichotomous choice question in the lab. It hasearlier been suggested that the dichotomous choiceformat suffers from anchoring and yea-saying.Comparing actual economic commitments for a privategood with a significant market value, we cannot rejectthe null hypothesis of equal WTP for the two formats.We conclude that problems with DC might be due toissues of how the survey is framed, not the DCquestion itself.     

Choice Consistency and Preference Stability in Test-Retests of Discrete Choice Experiment and Open-Ended Willingness to Pay Elicitation Formats

This study tests the temporal stability of preferences, choices and willingness to pay (WTP) values using both discrete choice experiment (DCE) and open-ended (OE) WTP elicitation formats. The same sample is surveyed three times over the course of two years using each time the same choice sets. Choice consistency is positively correlated with choice certainty and choice complexity. The impact of choice complexity fades away in time, most likely as a result of learning and preference refinement. Although the OE WTP values remain stable over a time period of 2 years as in previous stated preference studies, DCE based WTP measures differ significantly, suggesting their use in benefits transfer may be limited.     

Provision Point Mechanisms and Field Validity Tests of Contingent Valuation

Past field validity tests of contingent valuation have relied on voluntary contribution mechanisms to elicit actual willingness to pay, and may overestimate hypothetical bias because of free riding in the actual contributions. This paper argues that provision point mechanisms are a preferred alternative for field validity tests of contingent valuation because they increase the proportion of demand revealed in cases in which public goods can be provided in a step function. The results of a contingent valuation validity study of participation in a green electricity pricing program that uses a provision point mechanism are reported, and hypothetical open-ended and dichotomous choice responses are compared to actual participation. Calibration of hypothetical responses is also explored.     

Preference uncertainty in contingent valuation

In this paper, the results of empirical studies that applied two widely used methods - numerical certainty scale (NCS) and polychotmous choice (PC) - for estimating preference uncertainty adjusted willingness to pay (WTP) in contingent valuation (CV), are summarized. For this review, a number of conclusions are reached. First, there is a lack of consensus about which method is more appropriate for measuring preference uncertainty. Second, although preference uncertainty information has been found useful in detecting the incidence of hypothetical bias in CV studies, a consensus about a standard certainty threshold (or treatment mechanism) at which hypothetical behaviour converges to real behaviour is yet to emerge. Third, insufficient empirical evidence exists about the causal relationship between preference uncertainty scores and the theoretically expected explanatory variables. Finally, the preference uncertainty adjusted PC and NCS models fail to provide a consistent and more efficient welfare estimate compared to the conventional dichotomous choice certainty model.     

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.     

Exchange Rules and the Incentive Compatibility of Choice Experiments

The incentive properties of stated-preference surveys continue to be a central debate in the valuation of public goods. The majority of empirical studies have focused on incentive properties of contingent valuation questions in relation to situations where answers have monetary consequences. This research explores the incentive properties of repeated, attribute-based choice questions when subjects are provided with an explicit connection between choices and outcomes. Two market/provision-rules are investigated: a posted-price market and a plurality-rule vote. These two provision rules are contrasted to treatments in which no provision rule is discussed—subjects are simply asked to choose their preferred alternative. These three hypothetical choice treatments are compared with a binding choice treatment. While none of the public good treatments are theoretically incentive compatible, we include a comparison of hypothetical and binding choices for a private-good that is incentive compatible. The private good experiments indicate that marginal willingness to pay (WTP) estimates from the hypothetical treatment are larger, but not statistically different than corresponding estimates in the binding choice treatment. Results for the public good experiments indicate that marginal WTP estimates from the hypothetical treatments are much larger, and statistically different than corresponding estimates in the binding choice treatment. The bias is largest when no provision rule is discussed. The bias is reduced with the inclusion of a provision rule, but surprisingly, there was no difference across provision rule treatments. Overall, our results indicate that choice experiments involving a public good should include a provision rule to reduce bias, but the resulting marginal WTP estimates may still be more biased, on average, than those arising from contingent valuation survey formats.     

Despairing Over Disparities: Explaining the Difference Between Willingness to Pay and Willingness to Accept

This paper examines the three major explanations for the disparity between willingness-to-pay (WTP) and willingness-to-accept (WTA) observed in contingent value surveys and laboratory experiments: a belief that the results must be biased in some fashion, Hanemann's (1991) substitutes hypothesis, and the loss aversion model proposed by Tversky and Kahneman (1991). Starting from the assumption that individuals make utility maximizing choices, we develop structural equations that yield parametric tests of the hypotheses within a single, non-experimental framework. The approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open-ended bids or dichotomous choice questions. The usefulness of the approach is demonstrated using data from a survey that asked both WTP and WTA questions. The results provide weak support for loss aversion.     

Joint estimation of contingent valuation survey responses

Hanemann's utility difference model for the dichotomous choice contingent valuation method is modified to account for interrelationships between responses to a set of contingent valuation questions. A nonlinear seemingly unrelated regression model is presented to jointly estimate the probit models and to derive WTP from the CV responses. The model is used to test and impose restrictions derived from economic theory on the utility difference model. Mean WTP estimates for three different types of changes in the quality of California deer hunting were uniformly lower for the joint response probit model compared to a set of independent probit models.     

A Comparison of Value Elicitation Question Formats in Multiple-Good Contingent Valuation

This paper provides a convergent validity test of two types of multinomial choice questions vis-a-vis a dichotomous choice question by formally testing whether these stated preference elicitation question formats provide comparable welfare estimates. In particular, a dichotomous choice question, a traditional multinomial choice question, and a modified multinomial choice question suggested by Carson and Groves （2007） were applied in split samples to assess the influence of the informational and incentive properties on the respondents＇ annual willingness to accept compensation for adopting costly conservation practices in agriculture that benefit the environment. Our findings suggest that the two multinomial choice question formats elicit a similar mean willingness to accept distributions, but they are both different from a standarddichotomous choice question. Further, the willingness to accept distributions derived from the multinomial choice question formats are more dispersed than those from the dichotomous choice question.     

Contingent valuation and actual payment for voluntarily provided passive-use values: Assessing the effect of an induced truth-telling mechanism and elicitation formats

A fundamental question about the contingent valuation (CV) method is to what degree it predicts actual payments (AP). This has particularly been an intriguing matter related to voluntary provision of public goods representing primarily passive-use values. This paper reports the results from such a CV–AP comparison. Applying a voluntary payment mechanism there exists a theoretical expectation of upward bias in CV estimates and downward bias in AP. This study applied an induced truth-telling mechanism in one treatment group to assess the hypothetical bias effect in CV. The CV estimates in this treatment group were significantly lower than in the group that did not face this mechanism. But this effect was limited to those responding/acting to dichotomous choice, not affecting those responding to open-ended questions about willingness to pay.     

The Effect of Risk Characteristics on the Willingness to Pay for Mortality Risk Reductions from Electric Power Generation

The objective of this study is to estimate willingness to pay (WTP) for the reduction of mortality risks caused by fossil fuel (natural gas, coal and oil) versus nuclear electric power generation systems and to examine the influence of risk characteristics involved with electric power generation on WTP. A choice experiment was conducted to achieve these objectives. The attributes for nuclear risks in the experiment included the probability of disasters and the expected losses if a disaster occurs. We find evidence of (i) a baseline effect (where WTP is sensitive to hypothetical versus actual baseline expected mortality); (ii) a ‘labeling effect,’ where, surprisingly, the term ‘nuclear’ has no effect on WTP, but the term ‘fossil-fueled power generation’ results in lower WTP; and (iii) disaster aversion, meaning that people focus on the conditional loss from a nuclear disaster, not the probability. We also find that the WTP for reducing deaths from a nuclear disaster is about 60 times the WTP for routine reducing fossil-fuel generation-related deaths.     

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.     

Stated Preferences, Real Behaviour and Anchoring: Some Empirical Evidence

We compare different contingent valuation question formats with each other and with observed behaviour for a non-monetary estimation task, the expected number of kilometers travelled by automobile. Open-ended questions, open-ended follow-up questions, dichotomous choice (DC) questions, and double-bound DC questions are included. The single and double-bound DC questions result in an estimated mean about twice as high as the actual value and the open-ended mean. The DC question overestimation seems to be due to an anchoring effect leading to yea-saying behaviour. Our results about the difference between DC questions and open-ended questions is consistent with the pattern observed in contingent valuations studies of the willingness to pay. Our results indicates that DC questions seem to be associated with a general overestimation problem that is present even for simple non-monetary estimation tasks.     

Are There Income Effects on Global Willingness to Pay for Biodiversity Conservation?

This paper is concerned with the empirical relationship between biodiversity conservation values and income. We use random effects panel models to examine the effects of income, and then GDP per capita, on willingness to pay for habitat and biodiversity conservation. In a meta-analysis, 145 Willingness To Pay estimates for biodiversity conservation where existence value plays a major role were collected from 46 contingent valuation studies across six continents. Other effects included in the meta-analysis were the study year; habitat type; continent; scope as presented to respondents; whether WTP bids were for preventing a deterioration or gaining an improvement in conservation, whether a specific species or specific habitat was protected; whether the questionnaire used a dichotomous choice or an open-ended format; distribution format; and the choice of payment vehicle. GDP per capita seemed to perform as well as an explanatory variable as respondent’s mean stated income, indicating that it is wealth in society as a whole which determines variations in WTP. Even if large variation, our main conclusion is, that the demand for biodiversity conservation rises with a nation’s wealth, but the income elasticity of willingness to pay is less than one.     

Testing the Effectiveness of Certainty Scales,Cheap Talk,and Dissonance-Minimization in Reducing Hypothetical Bias in Contingent Valuation Studies

Stated preference methods such as contingent valuation and choice modeling are subject to various biases that may lead to differences between actual and hypothetical willingness to pay. Cheap talk, follow-up certainty scales, and dissonance minimization are three techniques for reducing this hypothetical bias. Cheap talk and certainty scales have received considerable attention in the literature, but dissonance minimization has not previously been experimentally tested. Using a four-way split sample design involving over 600 subjects, results from an actual referendum on provision of a quasi-public good were compared with three similar but contingent referenda employing the three bias-reducing techniques. Hypothetical bias was again present. Certainty scales, when properly calibrated, and dissonance minimization were found to be most effective in reducing the bias.     

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.     

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.     

Multivariate Mixed Models for Open-Ended Contingent Valuation Data: Willingness To Pay For Conservation of Monk Seals

Although dichotomous choice (DC) contingent valuation (CV) has been recommended by the US NOAA 'blue-ribbon' panel for large-scale contingent valuation studies, useful information can still be obtained from smaller, open-ended (OE) studies, often undertaken as a precursor to a DC survey. The CV study considered here was carried out in Greece and looked at willingness-to-pay (WTP) for protecting the Mediterranean monk seal (Monachus-monachus) in the Aegean area. This is the most endangered seal in the world, and the application of the CV methodology was the first such application in Greece. The OE data consist of two responses: first, a binary response detailing whether or not respondents were in principle prepared to pay for the protection of this seal; secondly, those respondents who answered 'yes' to the first question were then asked to state their maximum WTP for such protection. A multivariate binomial – log-normal mixture model is used to develop a bid function including explanatory variables such as income, sex, age and education. Such a modelling approach provides an alternative to more commonplace tobit estimation. However, the model is extended to include further information which was collected on:(a) an increased WTP amount given in response to information that the initial WTP amount may not be enough to prevent the extinction of the seal;(b) respondents were asked to divide their final WTP amount between use, option and existence values, the latter requiring a multivariate model with four binary and four continuous responses per individual in the same model.The discussion focuses on the methodological issues raised with some comment on the substantive interpretation of results.