Strategy and response to purchase intention questions

Purchase intention and willingness-to-pay (WTP) questions are often analyzed without considering that a respondent's utility maximizing answer need not correspond to a truthful answer. In this paper, we argue that individuals act, at least partially, in their own self-interest when answering survey questions. Consumers are conceptualized as thinking along two strategic dimensions when asked hypothetical purchase intention and WTP questions: (a) whether their response will influence the future price of a product and (b) whether their response will influence whether a product will actually be offered. Results provide initial evidence that strategic behavior may exist for some goods and some people.     

Heterogeneity distributions of willingness-to-pay in choice models

We investigate direct and indirect specification of the distribution of consumer willingness-to-pay (WTP) for changes in product attributes in a choice setting. Typically, choice models identify WTP for an attribute as a ratio of the estimated attribute and price coefficients. Previous research in marketing and economics has discussed the problems with allowing for random coefficients on both attribute and price, especially when the distribution of the price coefficient has mass near zero. These problems can be avoided by combining a parameterization of the likelihood function that directly identifies WTP with a normal prior for WTP. We show that the typical likelihood parameterization in combination with what are regarded as standard heterogeneity distributions for attribute and price coefficients results in poorly behaved posterior WTP distributions, especially in small sample settings. The implied prior for WTP readily allows for substantial mass in the tails of the distribution and extreme individual-level estimates of WTP. We also demonstrate the sensitivity of profit maximizing prices to parameterization and priors for WTP.

A risk worth taking: Perceived risk as moderator of satisfaction,loyalty, and willingness-to-pay premium price

This research investigates the moderating role of perceived risk in the relationship between satisfaction, loyalty, and willingness to pay premium price (WTP). A total of 364 respondents were recruited from Amazon's Mechanical Turk panel. Financial, social, performance, and psychological risks have significant negative effects on the relationship between satisfaction and WTP, whereas only financial risks have significant negative effects on the relationship between loyalty and WTP. Using moderated mediation analysis, we found that the mediating effects of loyalty diminish significantly in high social risk conditions and diminish completely in high financial risk conditions.     

Corporate social and environmental responsibility in services: Will consumers pay for it?

Two studies investigate consumer awareness of and response toward socially and environmentally responsible practices in the hospitality industry. Results suggest that consumers exhibit more positive response toward establishments exhibiting higher levels of social responsibility, although many are uninformed of the extent to which the organizations they patronize engage in such practices. Most consumers are willing to incur a modest price increase while patronizing an organization that behaves in an environmentally and socially responsible fashion, but that willingness declines dramatically as the price premium escalates. Consumers with high involvement in and positive attitudes toward corporate social responsibility practices are most willing to pay a premium.     

Modification of Costanza's model of valuing ecosystem services and its application in China

In the past, evaluations of ecosystem functions were mostly based on Costanza's model, whereas the spatial, quality and temporal characteristics of regional ecosystems were not considered in the model.Focusing on these Issues, coefficients of regional difference, spatial heterogeneity and willingness-to-pay (WTP) were established to modify Costanza's model, and a new comprehensive valuation model of ecosystem functions is proposed.The analytical results indicate that the comprehensive model could evaluate regional ecosystem functions in China accurately and provide more helpful information for decision-making.The empirical study on Zhangbei County in Hebei Province shows that the intensive human activities could limit the provision of ecosystem functions while the planned ecological programs might promote the restoration of ecosystem functions.     

Citizens,consumers and farm animal welfare: A meta-analysis of willingness-to-pay studies

The sustainable intensification of animal production systems is increasing as a consequence of increased demand for foods originating from animals. Production diseases are particularly endemic in intensive production systems, and can negatively impact upon farm animal welfare. There is an increasing need to develop policies regarding animal production diseases, sustainable intensification, and animal welfare which incorporate consumer priorities as well as technical assessments of farm animal welfare. Consumers and/or citizens may have concerns about intensive production systems, and whether animal production disease represent a barrier to consumer acceptance of their increased use. There is a considerable body of research focused on consumer willingness-to-pay (WTP) for improved animal welfare. It is not clear how this relates specifically to a preference for reduced animal production disease incidence in animal production systems. A systematic review and meta-analysis were conducted to establish the publics’ WTP for farm animal welfare, with a focus on production diseases which arise in intensive systems. Systematic review methodology combined with data synthesis was applied to integrate existing knowledge regarding consumer WTP for animal welfare, and reduced incidence of animal production diseases. Multiple databases were searched to identify relevant studies. A screening process, using a set of pre-determined inclusion criteria, identified 54 studies, with the strength of evidence and uncertainty for each study being assessed. A random effects meta-analysis was used to explore heterogeneity in relation to a number of factors, with a cumulative meta-analysis conducted to establish changes in WTP over time. The results indicated a small, positive WTP (0.63 standard deviations) for farm animal welfare varying in relation to a number of factors including animal type and region. Socio-demographic characteristics explained the most variation in the data. An evidence gap was highlighted in relation to reduced WTP for specific production diseases associated with the intensification of production, with only 4 of the 54 studies identified being related to this. A combination of market and government based policy solutions appears to be the best solution for improving farm animal welfare standards in the future, enabling the diverse public preferences to be taken into consideration.     

Valuing environmental and health risk in agriculture: A choice experiment approach to pesticides in Italy

The widespread use of pesticides in agriculture shows a complex ramification of multiple negative externalities, ranging from food safety-related effects to the deterioration of farmland ecosystems. Recent research has demonstrated that the assessment of the economic implications of such negative processes is fraught with many uncertainties. This paper presents the results of an empirical study recently conducted in Northern Italy aimed at estimating the economic value of reducing the wide-ranging impacts of pesticide use, by deploying a Choice Experiment approach. The experimental design provides a meaningful tool to assign monetary values to the negative environmental effects associated with agrochemicals use. In this connection, the paper addresses in particular the reduction of farmland biodiversity, groundwater contamination and harm to human health. The resulting estimates confirm that, on average, respondents demonstrate a substantial willingness-to-pay a premium for agricultural goods (in particular, foodstuffs) produced in environmentally-benign ways.     

Testing structural benefit transfer: The role of income inequality

How the valuation of environmental goods is related to income is a key question for economics, but the role of income inequality is often neglected. We study how income inequality affects the international transfer of the estimated value of environmental goods from a study to a policy site—a practice called value or benefit transfer. Specifically, we apply theory-driven, structural transfer factors to test whether adjusting for income inequality affects errors made in benefit transfer, drawing on a multi-country valuation study on water quality improvement. Our convergent validity analysis shows that the structural income inequality adjustment reduces benefit transfer errors by between 1.5 and 1.8 percentage points on average across all transfers. We therefore find that adjusting for income inequality offers only a minor improvement of benefit transfers as compared to adjusting for differences in mean income. Overall, our results shed light on the potential of structural approaches to benefit transfer for environmental valuation and public policy appraisal.     

Economic valuation of environmental services sustained by water flows in the Yaqui River Delta

We attempted to estimate the economic value of environmental services provided by restored instream flows in the water-scarce Yaqui River Delta in Mexico. The Yaqui River begins near the U.S.-Mexico border and continues for 400 km before reaching the Oviachic dam, but has not reached the nearby Gulf of California for decades due to diversions for irrigation. These diversions have degraded the riparian ecosystem, coastal wetlands, and estuaries. Environmental services provided by restored flows in the Yaqui River would include healthy riverside vegetation, wetlands and estuaries, fish and wildlife habitats, non-use values, and recreation. A contingent valuation survey in 40 neighborhoods in the most populated Delta city, Ciudad Obregon, was administered to estimate non-market values of instream uses. Respondents were given a current and hypothetical Delta scenario (the latter assumed restored water flows in the River) and asked a willingness-to-pay (WTP) question regarding purchasing water for environmental flows through higher water bills. Results from 148 in-person interviews indicated that households would pay an average of 73 pesos monthly. WTP was found related to key variables suggested by economic theory and contingent valuation studies elsewhere: income, educational level, number of children in the household, and initial bid amount. These results will allow decision makers to compare the benefits generated by different water uses, including environmental services, and to manage scarce water resources under a long-term sustainable approach.