Nicholas E. Flores

Contingent Valuation: Controversies and Evidence

Contingent valuation (CV) has become one of the most widely usednon-market valuation techniques. CVs prominence is due to itsflexibility and ability to estimate total value, includingpassive use value. Its use and the inclusion of passive use valuein benefit-cost analyses and environmental litigation are thesubject of a contentious debate. This paper discusses key areasof the debate over CV and the validity of passive use value. Weconclude that many of the alleged problems with CV can beresolved by careful study design and implementation. We furtherconclude that claims that empirical CV findings are theoreticallyinconsistent are not generally supported by the literature. Thedebate over CV, however, has clarified several key issues relatedto nonmarket valuation and can provide useful guidance both to CVpractitioners and the users of CV results.

Contingent Valuation and Incentives

We empirically investigate the effect of the payment mechanism on contingent values by asking a willingness-to-pay question with one of three different payment mechanisms: individual contribution, contribution with provision point, and referendum. We find statistical evidence of more affirmative responses in the referendum treatment relative to the individual contribution treatment, some weak statistical evidence of more affirmative responses in the referendum treatment relative to the provision point treatment, and no statistical evidence of more affirmative responses in the provision point treatment relative to the individual contribution treatment. The relative credibility of the three payment mechanisms is also examined. (JEL H41, Q26)

Market Failure in Information: The National Flood Insurance Program

The National Flood Insurance Program (NFIP) was established in 1968 and requires mandatory flood insurance for property owners who have federally backed mortgages. Krutilla (1966) noted that a compulsory national flood insurance program could greatly improve the economic efficiency of flood plain occupancy in the United States. However, in order to realize the efficiency gains suggested by Krutilla, property owners must have sufficient information about flood risk and insurance premiums to make well-informed home purchase decisions. Using survey data from Boulder, Colorado, we find significant evidence of market failure in information in the NFIP program. The majority of survey respondents, all of whom live in a special flood hazard area, report they did not fully understand the degree of flood risk or the cost of insuring against this risk when negotiating the purchase of their property. (JEL Q24)

Multiple-Bounded Uncertainty Choice Data as Probabilistic Intentions

The multiple-bounded uncertainty choice (MBUC) value elicitation method allows respondents to indicate qualitative levels of uncertainty, as opposed to a simple yes or no, across a range of prices. We argue that MBUC responses convey subjective probabilities. We examine the decision process of the researcher faced with estimating population parameters from MBUC sample responses. We develop her optimal decision rule based on a specified loss function. The resulting estimator accommodates uncertainty on the part of the respondent and the researcher. We illustrate the proposed estimation method using MBUC responses from the first field application of this elicitation format. The resulting framework produces stable estimates and nests alternative methods of modeling MBUC responses. (JEL Q26)

A Framework for Evaluating Digital Library Services

This article provides an overview of evaluation studies for libraries, a brief introduction to the CAPM Project, a description of the theoretical background for the CAPM methodology and, finally, a discussion of the implementation of the methodology for the CAPM Project.

Trying Not to Get Burned: Understanding Homeowners’ Wildfire Risk–Mitigation Behaviors

Three causes have been identified for the spiraling cost of wildfire suppression in the United States: climate change, fuel accumulation from past wildfire suppression, and development in fire-prone areas. Because little is likely to be performed to halt the effects of climate on wildfire risk, and because fuel-management budgets cannot keep pace with fuel accumulation let alone reverse it, changing the behaviors of existing and potential homeowners in fire-prone areas is the most promising approach to decreasing the cost of suppressing wildfires in the wildland–urban interface and increasing the odds of homes surviving wildfire events. Wildfire education efforts encourage homeowners to manage their property to decrease wildfire risk. Such programs may be more effective with a better understanding of the factors related to homeowners’ decisions to undertake wildfire risk–reduction actions. In this study, we measured whether homeowners had implemented 12 wildfire risk–mitigation measures in 2 Colorado Front Range counties. We found that wildfire information received from local volunteer fire departments and county wildfire specialists, as well as talking with neighbors about wildfire, were positively associated with higher levels of mitigation. Firsthand experience in the form of preparing for or undertaking an evacuation was also associated with a higher level of mitigation. Finally, homeowners who perceived higher levels of wildfire risk on their property had undertaken higher levels of wildfire-risk mitigation on their property.

Non-paternalistic altruism and welfare economics

Abstract Bergstrom showed that a necessary condition for a Pareto optimum with non-paternalistic altruism is classification as a selfish Pareto optimum. This paper shows that Bergstrom’s result does not generalize to the benefit–cost analysis of generic changes in public goods. There may exist good projects that will be rejected by a selfish-benefit cost test, a selfish test error. Selfish test error is linked to preference interdependence between public goods and income distribution, the same condition Musgrave identified as problematic for optimal public goods provision without altruism. Transferable selfish utilities provide freedom from selfish test error.

Catching fire? Social interactions, beliefs, and wildfire risk mitigation behaviors

Social interactions are widely recognized as a potential influence on risk-related behaviors. We present a mediation model in which social interactions (classified as formal/informal and generic/fire-specific) are associated with beliefs about wildfire risk and mitigation options, which in turn shape wildfire mitigation behaviors. We test this model using survey data from fire-prone areas of Colorado. In several cases, our results are consistent with the mediation hypotheses for mitigation actions specifically targeting vegetative fuel reduction. Perceived wildfire probability partially mediates the relationship between several interaction types and vegetative mitigation behaviors, while perceptions of aesthetic barriers and lack of information play a mediating role in the case of fire-specific formal interactions. Our results suggest that social interactions may allow mitigation and prevention behaviors to “catch fire” within a community, and that wildfire education programs could leverage these interactions to enhance programmatic benefits.

Optimal Public Goods Provision: Implications of Endogenizing the Labor/Leisure Choice

Conventional analysis of public goods provision aggregates individual willingness to pay while treating income as exogenous, ignoring the fact that we generate income to allow us to purchase utility-generating goods. We explore the implications of endogenizing the labor/leisure decision by explicitly considering leisure demand in a model of public goods provision. We consider benefit analysis of public goods provision and find that increments of the public good will generally be under-valued using conventional analysis while decrements to the public good (rare in public good settings) will be overvalued. (JEL C91, D61, Q51)

Comprehensive access to printed materials (CAPM)

The CAPM Project features the development and evaluation of an automat ed, robotic on-demand scanning system for materials at remote locations. To date, we have developed a book retrieval robot and a valuation analysis framework for evaluating CAPM. We intend to augment CAPM by exploring approaches for automated page turning and improved valuation. These extensions will results in a more fully automated CAPM system and a valuation framework that will not only be useful for assessing CAPM specifically, but also for library services and functions generally.