Asking for Individual or Household Willingness to Pay for Environmental Goods?

The aggregate welfare measure for a change in the provision of a public good derived from a contingent valuation (CV) survey will be higher if the same elicited mean willingness to pay (WTP) is added up over individuals rather than households. A trivial fact, however, once respondents are part of multi-person households, it becomes almost impossible to elicit an “uncontaminated” WTP measure that with some degree of confidence can be aggregated over one or the other response unit. The literature is mostly silent about which response unit to use in WTP questions, and in some CV studies it is even unclear which type has actually been applied. We test for differences between individual and household WTP in a novel, web-administered, split-sample CV survey asking WTP for preserving biodiversity in old-growth forests in Norway. Two samples are asked both types of questions, but in reverse order, followed by a question with an item battery trying to reveal why WTP may differ. We find in a test between samples that the WTP respondents state on behalf of their households is not significantly different from their individual WTP. However, within the same sample, household WTP is significantly higher than individual WTP; in particular if respondents are asked to state individual before household WTP. Our results suggest that using individual WTP as the response unit may overestimate aggregate WTP. Thus, the choice of response format needs to be explicitly and carefully addressed in CV questionnaire design and further research in order to avoid the risk of unprofitable projects passing the benefit-cost test.

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Some issues in the application of closed-ended willingness to pay studies to valuing health goods: an application to antenatal care in Scotland

Limited resources coupled with unlimited demands means that decisions have to be made concerning the allocation of scarce health care resources. The economic instrument of willingness to pay (WTP) is one instrument that can be used to help this decision-making process. Recommendations from the environmental economics literature suggest that the closed end (CE) WTP approach should be used. This approach is just beginning to be used to value health goods. This paper addresses the sensitivity of the closed-ended WTP approach to three issues: the design of the bid vector; the upper and lower limits of integration; and the method of analysis. These are discussed with reference to a study looking at the value of alternative models of ante-natal care in Scotland. The results are discussed and conclusions made concerning the use of the CE WTP instrument for valuing health goods.     

Modelling the Non-market Environmental Costs and Benefits of Biodiversity Projects Using Contingent Valuation Data

CV studies rarely ask willingness to accept (WTA)questions, yet there are a range of environmentalprojects where there are likely to be potential losersas well as gainers. This paper presents evidence fromsix biodiversity projects that the inclusion ofcontingent compensation payments from thoserespondents who preferred the status quo cansubstantially reduce net project benefits, even whenthe proportion of losers is relatively small. Astatistical model for estimating the mean welfaremeasure from dichotomous choice data which allows forboth positive WTP, zero WTP, and WTA is described. Asmany environmental projects are likely to create bothgainers and losers, we recommend that CV analysts giveserious consideration to the collection and analysisof WTA data otherwise they risk generating biasedestimates of project benefits.     

How the source of the entrant's advantage limits entry‐deterring tying

I revisit a simple model of entry‐deterring tying—example 1 from Whinston's (1990) seminal paper—but allow the potential entrant to have either a cost advantage or a willingness‐to‐pay (WTP) advantage relative to the incumbent. I show that, compared to the usual case in which the potential entrant is cost‐advantaged, tying is less effective against an entrant with a WTP advantage because an entrant with a large WTP advantage may be able to induce the buyer to buy both the tied bundle and the entrant's product. I also show that tying but failing to deter entry can be less costly when facing an entrant with a WTP advantage than when facing an entrant with a cost advantage. For a firm facing uncertainty about, for example, the entrant's entry costs, this makes tying a more attractive entry deterrence strategy against a WTP‐advantaged entrant. These results shed light on the important policy question of which markets are most likely to be susceptible to entry‐deterring tying.     

Economic Evaluation of Health-care Programmes: Is CEA Better than CBA?

It has been noted earlier that during the same period that the contingent valuation (CV) method evolved and became the most commonly used method of valuing environmental projects, the development in health economics was instead been towards cost–effectiveness analysis (CEA). Recently there has been a growing interest in the use of CEA, where QALYs (quality-adjusted life-years) are used as a measure of effectiveness, as the method of evaluation for environmental projects. The purpose of this paper is to answer the question – is CEA a superior method to CBA (both theoretically and empirically) to provide information to decision makers for use in decisions on resource allocation in health. The paper deals with the following topics: the underlying theoretical foundation for CEA; is CEA free of income distribution considerations?; is QALY a superior measure to WTP?; the usefulness of incremental CE ratio (ICER) to determine resource allocation. The paper concludes that there is neither theoretical nor practical support for the claim about the superiority of CEA.     

Towards a framework to understand purpose in Futures Studies: The role of Vickers' Appreciative System

There have been comments recently about the efficacy of Futures Studies (and scenario planning) projects, relating to confusion on knowledge aggregation and methodology, which can be summarised in the question: “how to determine the purpose of such projects”. The lack of a purpose framework makes it difficult for ‘clients’ initiating such projects to determine if outcomes meet their original expectations. This paper proposes a framework to help understand the nature, objective and purpose of Futures Studies (and scenario planning) projects, which we will argue helps to overcome these concerns. The proposed framework is based on Vickers' definition of an Appreciative System, highlighting how decision making involves three areas of judgment — reality judgment, value judgment, and instrumental judgment. It will be argued that decision-makers and policymakers call for Futures Studies projects when they become aware of an organizational deficiency in one or more of these areas.Each element, alone or in combination, could form the basis of a purpose definition for a Futures Studies project, and, therefore, needs to be considered to ensure that the project meets client expectations and is experienced as purposeful and rewarding. The paper elaborates on each of the three elements, and then discusses their integrated nature. This is followed by a discussion of the implications of Appreciative System theory for three key players in the decision making process, the organizational leadership, the professionals and the organization at large involved in the practice of Futures Studies (and scenario planning) projects.     

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.     

Using a choice experiment to estimate the benefits of a reduction of externalities in urban areas with special focus on electrosmog

Traffic noise, air pollution and electromagnetic pollution (i.e. nonionizing radiation, also called electrosmog) are typical negative local externalities in urban areas. They are side effects of human and economic activities (e.g. road transport, telecommunication) and they affect individuals’ well being negatively without compensation. In recent years, the increased number of mobile phone antennas in residential areas, and thus the increased intensity of radiated power, has aroused public concern, discussions and protests. The view of an antenna is annoying an increasing number of inhabitants. In this article, the stated Choice Experiment (CE) is used to estimate the Willingness To Pay (WTP) residents in the cities of Zurich and Lugano place on the reduction of these three environmental loads. Estimation results reveal that there is a positive and significant WTP for a reduction of air pollution and traffic noise levels to those limit values fixed by the government. Respondents also show WTP for reducing electrosmog and removing mobile phone antennas from their view, however to a lesser extent. In addition, this is the first study that estimates the benefit of a reduction of electrosmog using a CE.     

ESTEEM: Managing societal acceptance in new energy projects : A toolbox method for project managers

There is now a large literature dealing with the policy question of public participation in technical choice and technology assessment (TA). Files such as the mad cow crisis, genetically modified food, and the emerging nanotechnologies have been edified into a public problem, and have given place to a number of experiments and reviews about participatory arrangements. Much less attention has been devoted so far to the application of the TA framework to more local and limited projects-not yet and maybe never reaching the public problem status-and the management of their societal dimensions. Among them, new energy technology represents a very interesting field for investigation: many of the new energy enjoy a global positive public image whereas the local implementation of their implantation often raises societal questions and oppositions. This paper describes an original experiment conducted in the field of new energy technologies during which a participatory technology assessment inspired approach was applied to a number of individual and local projects. A framework methodology called ESTEEM was developed to facilitate such participatory process to take place, and it was tested and evaluated in 5 projects located in 5 different countries over Europe. A detailed discussion of the ESTEEM method and its application to one case study, a Carbon Sequestration project in The Netherlands, is provided. We show that a major question in the application in such participatory framework is to establish a reflective practice of project management based on situated and constructive interactions between project promoters and project stakeholders.     

Dealing with preference uncertainty in contingent willingness to pay for a nature protection program: A new approach

In this paper, we propose an alternative preference uncertainty measurement approach where respondents have the option to indicate their willingness to pay (WTP) for a nature protection program either as exact values or intervals from a payment card, depending on whether they are uncertain about their valuation. On the basis of their responses, we then estimate their degree of uncertainty. New within this study is that the respondent's degree of uncertainty is “revealed”, while it is “stated” in those using existing measurement methods. Three statistical models are used to explore the sources of respondent uncertainty. We also present a simple way of calculating the uncertainty adjusted mean WTP, and compare this to the one obtained from an interval regression. Our findings in terms of determinants of preference uncertainty are broadly consistent with a priori expectations. In addition, the uncertainty adjusted mean WTP is quite similar to the one derived from an interval regression. We conclude that our method is promising in accounting for preference uncertainty in WTP answers at little cost to interviewees in terms of time and cognitive effort, on the one hand, and without researcher assumptions regarding the interpretation of degrees of uncertainty reported by respondents, on the other.     

A cost-benefit analysis of restoring the Em River in Sweden: valuation of angling site characteristics and visitation frequency

This article uses Cost-Benefit Analysis (CBA) to evaluate restoration scenarios aimed at improving angling on the Em River in Sweden. We find that none of the proposed projects are socially profitable when considering only values associated with angling. We rely on a Choice Experiment (CE) to derive utilities and estimate the monetary value of angling site characteristics and then also use the utilities derived in a visitation frequency using a two-stage budgeting approach. The visitation frequency is then used to extract values for fishing license sales and business-related income. The case study illustrates how CBA can provide useful insights into the potential economic returns of environmental restoration projects. Our case study also indicates that the results in terms of Willingness-To-Pay (WTP) and visitation frequency are general findings – i.e. they appear similar across angling sites – which is particularly useful from a policy point of view because it supports the use of benefit transfer for more cost-effective river management.     

Contingent values as implicit contracts: estimating minimum legal willingness to pay for conservation of large carnivores in Sweden

Mean willingness-to-pay (WTP) based on multiple bounded, discrete choice responses from contingent valuation surveys are normally obtained using some kind of parametric estimator. This paper instead exploits the possibility to interpret the response to the discrete-choice question as an implicit contract between the researcher and the respondent, resulting in a minimum legal WTP (MLW) estimator. Never previously used in valuation literature, it is used in this paper to estimate the WTP for the preservation of large carnivores in Sweden, based on a large scale, national survey. Results show that MLW estimates only were 12–19% of the comparable parametric estimates. In keeping with other results in contingent valuation literature, we find that the MLW estimates are positively related to the educational level, income and the fraction of urban population, while negatively related to age. Among the advantages of the MLW estimator is its transparency as well as the fact that it rests on a contractual notion of WTP.      

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.     

Latent preferences and valuation of wetland ecosystem restoration

We employ a latent class choice model to evaluate the effects of alternative ecological characterizations of wetland functions and services on individual preferences, and to determine whether socioeconomic factors and psychometric measures of environmental attitudes can explain differences in individual's preferences and values for wetland restoration. This analysis combines a multiattribute choice model with information on individual's characteristics to evaluate preferences for restoration of the Greater Everglades ecosystem, one of the largest and most comprehensive wetland ecosystem restoration projects. To identify potential endpoints for Everglades restoration, two alternative ecological characterizations of the ecosystem were developed using the familiar distinction between function and structure. Survey data from a representative sample of the general population were used in a split-sample design based on the ecological characterization treatment. Within each subsample, the latent class analysis identified three groups who varied in their preferences for ecosystem restoration and socioeconomic profiles. The ecological characterizations had a significant influence on respondents' preferences and willingness to pay (WTP). The subsample responding to the structural characterization had a significantly larger share of respondents in the group who favored proposed restoration plans than the functional attribute subsample. In both subsamples, the group who favored restoration had a higher WTP for restoration than other groups. The latent class analysis also revealed socioeconomic and attitudinal factors that explain some of the heterogeneity in preferences and WTP within each subsample; this heterogeneity would not be identified with a standard choice model. In the context of Everglades restoration, the results provide a baseline assessment of public support and WTP that suggests an emphasis on structural rather than functional restoration endpoints. The approach described in this article can be used in other policy studies of wetland ecosystems because multiple ecosystem services can be represented within a stated choice survey and differences in preferences and values for these services can be measured.     

Marginal Valuation of Charismatic Species: Implications for Conservation

Most contingent valuation studies focus on total willingness to pay (WTP) as a measure of welfare change. For policy involving species preservation, however, it is important to distinguish between the benefits of preventing a species from going extinct and the benefits of preserving numbers above the minimum viable population (MVP) level. Once MVP is exceeded, marginal WTP becomes relevant. These propositions are illustrated for the case of one charismatic species whose management is much debated, minke whales in the Northeast Atlantic Ocean. It is shown that, for a given estimate of total preservation value, strict conservation and extinction can both be optimal. This finding highlights the importance of collecting marginal values in contingent valuation surveys.     

Exploring local projects for sustainable energy in system transition: local perceptions of success

In the sustainability transitions literature, ‘success’ is conceived as the transition from an unsustainable system to a sustainable one. However, this view hides a more profound complexity in individual projects which can contribute to system transition. This paper focuses instead on local projects as key sites for change. In two case studies of UK sustainable energy projects, success is shown to be characterised by different causative beliefs held by different people about the problems being addressed, which predetermines solutions to those problems; and hence the nature of success. By acknowledging this multiplicity of success, as perceived by ordinary residents and project organisers as well as transition scholars, ‘narratives of success’ can be recognised, enabling future projects to build on success, and continue along the path to transition. This reconceptualisation provides transition scholars with new ways of understanding and effecting transitions; by focusing on the project level, which is useful in contexts with varying commitment to sustainability.     

Willingness to pay for other species' well-being

Benefit-cost analysis of environmental policies typically focuses on benefits to human health and well-being. For other species, economists have attempted to measure human WTP for changes in the numbers of individuals for different types of wildlife, and to preserve biodiversity. When it comes to humans' WTP for improvements in the quality-of-life for other species, however, the evidence is limited. Morbidity and quality-of-life considerations may be particularly important to the task of valuing non-fatal harm to wildlife in the wake of an environmental disaster. We argue that the other species morbidity-reduction component of WTP should be calculated net of any “outrage” component associated with the cause of the harm. This net WTP is likely to be correlated with the premium that people are willing to pay for chicken products from birds for which the quality-of-life has been enhanced by improved animal welfare measures. This paper uses a conjoint choice stated preference survey to reveal the nature of systematic heterogeneity in preferences for “humanely raised” versus “conventionally raised” chicken. We also use latent class analysis to distinguish between two classes of people—those who are willing to pay a premium for humanely raised chicken, and those who are not.     

Protesting and Justifying: A Latent Class Model for Contingent Valuation with Attitudinal Data

This article develops a latent class model for estimating willingness-to-pay (WTP) for public goods using simultaneously contingent valuation (CV) and attitudinal data to identify individuals with similar characteristics, such as WTP and protest attitudes. We find evidence that the answer to the CV question influences the responses to the attitudinal questions. In our case, this influence reflects rational behavior (budget constraint issues) and justification biases related to protest reasons, such as lack of trust in institutions or fairness issues with respect to the distribution of the burden of preservation. The results from our empirical application confirm the importance of accounting for those biases.     

DOES THE PROVISION OF PUBLIC GOODS CORRESPOND TO LOCAL DEMAND?

Recently China's central government has promoted public goods investment in pursuit of rural development and poverty reduction. However, the top down nature of investment planning may lead to mismatches between public goods projects and the demands of local residents. Using village‐ and household‐level survey data, this study seeks to identify the determinants of project implementation, focusing on investments in roads, drinking water, and irrigation. Contrary to some popular perception, our results suggest symmetry between farmers' reported demand and the types of projects implemented in their villages. The relative contribution of local demand to project implementation is seen to vary, however, across different types of public goods. (JEL D71, H41, H77, P35)     

Are Internet surveys an alternative to face-to-face interviews in contingent valuation?

Internet is an increasingly popular data collection mode for stated preference research in environmental economics. However, little is known about how this survey mode may influence data quality and welfare estimates. As part of a national contingent valuation (CV) survey estimating willingness to pay (WTP) for biodiversity protection plans, we assign two groups of respondents either to an Internet or face-to-face (in-home) interview mode. Our design aims to better isolate measurement effects from sample composition effects by drawing both samples from the same sample frame. We find little evidence of social desirability bias in the interview setting or satisficing (shortcutting the response process) in the Internet survey. The share of “don't knows”, zeros and protest responses to the WTP question with a payment card is very similar between modes and equality of mean WTP cannot be rejected. Results are fairly encouraging for the use of Internet in CV as stated preferences do not seem to be significantly different or biased compared to face-to-face interviews.