Patricia A. Champ

A primer on nonmarket valuation

List of Contributors. Preface P.A. Champ, K.J. Boyle, T.C. Brown. 1. Economic Valuation: What and Why A. Myrick Freeman III. 2. Conceptual Framework for Nonmarket Valuation N.E. Flores. 3. Collecting Survey Data for Nonmarket Valuation P.A. Champ. 4. Introduction to Stated Preference Methods T.C. Brown. 5. Contingent Valuation in Practice K.J. Boyle. 6. Attribute-Based Methods T.P. Holmes, W.L. Adamowicz. 7. Multiple Good Valuation T.C. Brown, G.L. Peterson. 8. Introduction to Revealed Preference Methods K.J. Boyle. 9. The Travel Cost Model G.R. Parsons. 10. The Hedonic Method L.O. Taylor. 11. Defensive Behavior and Damage Cost Methods M. Dickie. 12. Benefit Transfer R.S. Rosenberger, J.B. Loomis. 13. Nonmarket Valuation in Action D.W McCollum. 14. Where to from Here? R.C. Bishop. Index.

Which response format reveals the truth about donations to a public good

Several contingent valuation studies have found that the open-ended format yields lower estimates of willingness to pay (WTP) than does the closed-ended, or dichotomous choice, format. In this study, WTP for a public environmental good was estimated under four conditions: actual payment in response to open-ended and closed-ended requests, and hypothetical payment in response to open-ended and closed-ended requests. The experimental results, showing that the response format mattered far more for hypothetical than for actual payments, support conclusions about the reasons that the dichotomous choice format yields larger estimates of hypothetical WTP, conclusions that hinge on the hypothetical nature of contingent valuation.

Donation Payment Mechanisms and Contingent Valuation: An Empirical Study of Hypothetical Bias

Donation payment mechanisms are well suited forsome contingent valuation studies. In aneffort to better understand the discrepancythat has been consistently found between actualand hypothetical donations, we investigate anapproach to estimating actual willingness todonate using contingent donations with afollow-up question in which respondents ratethe level of certainty about their response tothe contingent donation question. The approachallows us to estimate the magnitude of thehypothetical bias and identify the respondentsresponsible for the bias. Identification ofthe respondents responsible for thehypothetical bias is the first step towarddeveloping an understanding of the causes andpossible remedies. In this study we find thatmost of the respondents (80%) to thecontingent donation question provide a responseconsistent with how we predict they wouldrespond in an actual donation situation.

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)

Measuring the Difference in Mean Willingness to Pay When Dichotomous Choice Contingent Valuation Responses Are Not Independent

Dichotomous choice contingent valuation surveys frequently elicit multiple values in a single questionnaire. If individual responses are correlated across scenarios, the standard approach of estimating willingness to pay (WTP) functions independently for each scenario may result in biased estimates of the significance of the difference in mean WTP values. This paper applies an alternative bivariate probit approach that explicitly accounts for correlation across errors in the estimation of WTP and mean WTP. Using data from three separate dichotomous choice contingent valuation studies, this correlation is demonstrated to have an effect on the significance level of mean WTP difference tests.

Wildfire risk and housing prices: a case study from colorado springs

In 2000, concerned about the risks of wildfires to local homes, the Colorado Springs Fire Department rated the wildfire risk of 35,000 housing parcels within the wildland-urban interface and made its findings available online. We examine the effectiveness of this rating project by comparing the relationship between home price and wildfire risk before and after the information was posted on the Web site. Before the information was available, home price and wildfire risk were positively correlated, whereas, afterwards, they were not. (JEL R26, Q51)

Using Respondent Uncertainty to Mitigate Hypothetical Bias in a Stated Choice Experiment

In a choice experiment study, willingness to pay for a public good estimated from hypothetical choices was three times as large as willingness to pay estimated from choices requiring actual payment. This hypothetical bias was related to the stated level of certainty of respondents. We develop protocols to measure respondent certainty in the context of a choice experiment, and to calibrate hypothetical choices using these certainty measures. While both the measurement of respondent certainty and the use of certainty measures to calibrate responses are complicated by the multiple-choice nature of choice experiments, calibration successfully mitigated hypothetical bias in this application. (JEL Q51)

Is Willingness to Pay for a Public Good Sensitive to the Elicitation Format

This study uses actual payments toward the provision of a public good to compare dichotomous choice and payment card formats. The public good in question is the environmental improvement from wind generation of electric power. We find that willingness-to-pay estimates vary with the elicitation format. Based on this result, we argue that elicitation effects found in contingent valuation studies may not be due the hypothetical nature of decision-making, as has been suggested in previous studies. (JEL H41, Q51)

The economic cost of adverse health effects from wildfire-smoke exposure: a review

The economic costs of adverse health effects associated with exposure to wildfire smoke should be given serious consideration in determining the optimal wildfire management policy. Unfortunately, the literature in this research area is thin. In an effort to better understand the nature of these economic costs, we review and synthesise the relevant literature in three areas: studies that estimated the health-related economic costs of wildfire-smoke exposure; epidemiology studies related to the health risk of wildfire smoke; and general economic studies that estimated the monetary value of preventing the specific adverse health outcomes. Based on the findings from this literature review, we identify the need for a better understanding of the effect of wildfire smoke on major and minor adverse health outcomes. It would also be useful to know more about averting behaviours among residents exposed to smoke during a wildfire event. Finally, we suggest investigating the unique health effects of wildfire smoke compared with conventional air pollution to determine whether it is appropriate to extrapolate from previously estimated conventional pollution dose-response functions.

A Comparison of Approaches to Mitigate Hypothetical Bias

We compare two approaches to mitigating hypothetical bias. The study design includes three treatments: an actual payment treatment, a contingent valuation (CV) treatment with a follow-up certainty question, and a CV treatment with a cheap talk script. Our results suggest that both the follow-up certainty treatment and the cheap talk treatment produce willingness-to-pay (WTP) estimates consistent with the actual payment treatment. However, the follow-up certainty treatment provides response distributions at all offer amounts that are statistically similar to the actual payment treatment, while the cheap talk treatment provides similar responses only at some offer amounts. Furthermore, the cheap talk treatment is effective only for inexperienced individuals. We conclude that the follow-up certainty approach is more consistent than the cheap talk approach for eliminating hypothetical bias.