John P. Hoehn

A satisfactory benefit cost indicator from contingent valuation

Abstract Standard economic concepts are used to develop a model of individual behavior when subject to the constraints of the contingent valuation choice context. The model yields refutable consequences that are consistent with previously reported empirical findings, including some that have been thought to be anomalous. The model is used to show that different contingent valuation formats have predictably different performance characteristics. Notably, the Hicksian compensating measures are satisfactory benefit cost indicators when elicited using any one of several formats identified in the text. Of the formats examined, one form of a policy referendum appears to have the most satisfactory characteristics. Overall, we conclude that contingent valuation is a progressing research program.

Valuing the Multidimensional Impacts of Environmental Policy: Theory and Methods

A theoretically consistent framework is developed for valuing the multidimensional impacts of environmental policy. Conventional benefit estimates are shown to be biased because of the presence of substitution and complementarity effects in valuing policy impacts. Procedures are developed for implementing a valid framework. Consistent with theory, empirical results indicate significant substitution effects in valuing environmental conditions across different geographic regions.

Do focus groups and individual interviews reveal the same information for natural resource valuation

Abstract Focus groups and individual interviews have become accepted methods used in the initial stages of valuation research. Whether focus groups and individual interviews reveal similar valuation information has not been thoroughly studied. The research tests the hypothesis that focus groups yield the same ecosystem service information as do individual interviews. The research also explores how the focus group and individual interview data might differ. The analysis shows that focus groups and individual interviews are not substitutes. They yield different information about ecosystem services and resource uses.

The Impact of Health Risk Information on Food Demand: A Case Study of Alar and Apples

One method used for overcoming the problem of preference revelation for safety improvements is to infer willingness-to-pay from consumer choice of private goods (Blomquist 1979, Dardis 1980, Hammitt 1986, Ippolito and Ippolito 1984). This strategy may be useful for estimating willingness-to-pay for food safety because in recent years information on risks from food additives has been widely reported by the news media and these reports have been found to affect food demand (Brown 1969, Brown and Folsom 1983, Johnson 1988, Shulstad and Stoevener 1978, Smith et al. 1988, Swartz and Strand 1981).

The effect of resource quality information on resource injury perceptions and contingent values

The analysis examines how resource injury information provided by a questionnaire affects contingent valuations. A key determinant is the difference between new and prior information. Redundant information has no effect. Also, respondents have different priors so the effect of new information is uneven; information increases restoration value for some respondents while reducing it for others. Empirical results confirmed the heterogeneity of respondents. Values were sensitive to the broad dimensions of a resource injury, such as the geographic extent and toxicity. Injury details had less significant effects that varied from positive to negative in algebraic sign.

Using an Economic Model of Recreational Fishing to Evaluate the Benefits of Sea Lamprey (Petromyzon marinus) Control on the St. Marys River

Abstract This paper describes efforts to estimate economic benefits of improved sea lamprey (Petromyzon marinus) suppression on the St. Marys River. By linking an economic model of recreational fishing in Michigan to fish populations in the Great Lakes, a method is illustrated for estimating economic benefits that accrue to recreational anglers when fish populations increase. Previous economic efforts to evaluate sea lamprey control have taken a basin-wide view to determine optimal steady-state control levels based on economic injury levels, or have focused on whether or not the entire sea lamprey treatment program is justified. While capable of being adapted to either of these types of evaluations, the method presented here was used to estimate benefits to Michigan anglers of several sea lamprey treatments options for the St. Marys River. When estimated benefits are compared to treatment costs, all treatment options examined are shown to have different, but positive, net present value. Thus, the results suggest that sea lamprey suppression efforts on the St. Marys River yield economic benefits that exceed costs, and this holds even though only part of the economic benefits have been measured.

The Economic Equivalency of Drained and Restored Wetlands in Michigan

Wetland ecosystems are valued for a range of ecological services. These services are protected by national, state, and local regulation. The primary federal wetland protection statute is Section 404 of the Clean Water Act (33 U.S.C. Section 1344). Under this statute, the U.S. Army Corps of Engineers, in conjunction with the U.S. Environmental Protection Agency (EPA), administers a review and permitting process for the “discharge of fill material” in “waters of the United States.” Since 1989, the guiding principle of federal wetland policy has been the “no net loss” of wetlands criterion (Gaddie and Regens). To implement this principle, the wetland permit process encourages potential dischargers to avoid and minimize wetland impacts wherever possible. Where wetlands are impaired or destroyed, wetland mitigation is required. Mitigation refers to actions taken to recreate, restore, or protect wetlands of an equivalent type and function to those being impaired or destroyed (Denison and Schmid). Since wetlands vary by type, ecological functions, and the services they yield to humans, the means for judging the equivalency of destroyed and mitigated wetlands is both problematic and central to successful implementation of the “no net loss” policy (National

An Economic Analysis of Water and Wastewater Investments in Cairo, Egypt

Nonmarket valuation methods have proved useful in planning and evaluating investments in water and wastewater infrastructure in developing countries. This study used contingent referendum methods to estimate household willingness to pay for each of four types of service improvements stemming from water and wastewater investments in Cairo, Egypt. An analysis of the net economic benefits of the investments concluded that benefits exceeded costs for all projects. Cost recovery was not assured with a fixed tariff. Willingness to pay for some households was less than the per household cost necessary for cost recovery. Cost recovery was also sensitive to whether tariffs were set for individual services or charged for a combined package of services.

Split-Sample Tests of "No Opinion" Responses in an Attribute-Based Choice Model

Researchers using questionnaires to elicit preferences must decide whether to include response options that allow respondents to express “no opinion.” Using a split-sample design, we explore the implications of alternative answer formats including and not including no-opinion responses in an attribute-based choice experiment. The results indicate that using multiple no-opinion responses may enable researchers to differentiate between respondents who choose no-opinion options due to satisficing and those expressing utility indifference. Existing literature suggests no-opinion responses may be treated as “no,” but our results show treating no-opinion responses as “no” can yield substantially disparate preference estimates. (JEL C25, Q24, Q25, Q51)

Contingent Valuation in Fisheries Management: The Design of Satisfactory Contingent Valuation Formats

Abstract Fisheries management involves trade-offs across recreational, commercial, and aesthetic goods. Contingent valuation assists in quantifying these trade-offs by eliciting resource values directly from the individuals who are affected by resource management. Recent research identifies three sources of potential error in contingent valuation design: (1) communication of complex policy information to individual respondents, (2) time constraints on a respondents valuation decisions, and (3) strategic effects that arise as a respondent attempts to influence policy outcomes. A conceptual framework and design guidelines are developed for controlling these sources of error.