Trudy Ann Cameron

A New Paradigm for Valuing Non-market Goods Using Referendum Data: Maximum Likelihood Estimation by Censored Logistic Regression'

Abstract This paper challenges the W. M. Hanemann [ Amer. J. Agr. Econom. 66 , 332–341 (1984)] and C. Sellar, J. P. Chavas, and J. R. Stoll [ J. Environ. Econom. Management 13 , 382–390 (1986)] utilizations of logit models to estimate the value of non-market resources from “referendum” survey data. These data are more informative than conventional choice data. The “random utility” interpretation of logit models is therefore too restrictive. Bypassing the utility function entirely, it will be shown that parameters and standard errors for utility-theoretic inverse Hicksian demand functions can be extracted directly and much more simply. Estimated demand functions need not be limited to those corresponding to the linear-in-parameters utility difference specifications which can be handled by packaged logit programs.

OLS versus ML Estimation of Non-market Resource Values with Payment Card Interval Data

Abstract Contingent valuation methods (CVM) have been shown to be potentially very useful for eliciting information about demands for non-market goods. We assess the sensitivity of “payment card” CVM results to the researchers choice of estimation method. Empirical payment card data are used in both (a) a naive ordinary least squares (OLS) procedure employing interval midpoints as proxies for the true dependent variable, and (b) an efficient maximum likelihood (ML) procedure which explicitly accommodates the intervals. Depending upon the design of the payment card, OLS can yield biased parameter estimates, misleading inferences regarding the effects of different variables on resource values, and biased estimates of the overall resource value.

Combining Contingent Valuation and Travel Cost Data for the Valuation of Nonmarket Goods

The travel cost method (TCM) has long been used to infer the economic value of nonmarket resources and public goods. More recently, contingent valuation (CVM) survey methods have gained popularity for eliciting these values. Here, CVM survey responses are combined with TCM data on actual market behavior to estimate jointly both the parameters of the underlying utility function and its corresponding ordinary demand function. This is a prototypical empirical example of a new modeling strategy, variants of which should prove useful in many applications, especially where reliance on a single valuation method is undesirable.

Dissecting the Random Component of Utility

We illustrate and discuss several general issues associated with the random component of utility, or more generally “unobserved variability”. We posit a general conceptual framework that suggests a variance components view as an appropriate structure for unobserved variability. This framework suggests that “unobserved heterogeneity” is only one component of unobserved variability; hence, a more general view is required. We review a considerable amount of empirical research that suggests that random components are unlikely to be independent of systematic components, and random component variances are unlikely to be constant between or within individuals, time periods, locations, etc. We also review evidence that random components are functions of (elements of) systematic components. The latter suggests considerable caution in the use and interpretation of complex choice model specifications, in particular recently introduced forms of random parameter models that purport to estimate distributions of preference parameters. Several areas for future research are identified and discussed.

Individual Option Prices for Climate Change Mitigation

Willingness to pay for climate change mitigation depends on peoples perceptions about just how bad things will get if nothing is done. Individual subjective distributions for future climate conditions are combined with stated preference discrete choice data over alternative climate policies to estimate individual option prices (the appropriate ex ante welfare measure in the face of uncertainty) for climate change mitigation. We find significant scope effects in the estimated option prices according to both expected conditions and degree of uncertainty.

REFERENDUM CONTINGENT VALUATION ESTIMATES : SENSITIVITY TO THE ASSIGNMENT OF OFFERED VALUES

Abstract Contingent valuation methods (CVM) are becoming increasingly popular for assessing the value of nonmarket resources and public goods. In particular, CVM “willingness to pay” estimates are gaining currency for the assessment of damages in environmental litigation. Several studies have compared the value estimates resulting from alternative formats used for CVM survey questions and have speculated on the reasons for observed discrepancies. These reasons now include a whole taxonomy of possible biases. We take a closer look at one CVM format—the referendum—and demonstrate that simply the “luck of the draw” in assigning the referendum thresholds on individual questionnaires can produce a surprisingly wide variety of value estimates. We control for the behavioral biases that confound other comparison studies by using one sample of “payment card” CV data and simulating 200 samples of consistent referendum responses. Due to the inefficiency of the referendum format, we conclude that, where referendum qu...

Contemporary Guidance for Stated Preference Studies

This article proposes contemporary best-practice recommendations for stated preference (SP) studies used to inform decision making, grounded in the accumulated body of peer-reviewed literature. These recommendations consider the use of SP methods to estimate both use and non-use (passive-use) values, and cover the broad SP domain, including contingent valuation and discrete choice experiments. We focus on applications to public goods in the context of the environment and human health but also consider ways in which the proposed recommendations might apply to other common areas of application. The recommendations recognize that SP results may be used and reused (benefit transfers) by governmental agencies and nongovernmental organizations, and that all such applications must be considered. The intended result is a set of guidelines for SP studies that is more comprehensive than that of the original National Oceanic and Atmospheric Administration (NOAA) Blue Ribbon Panel on contingent valuation, is more germane to contemporary applications, and reflects the two decades of research since that time. We also distinguish between practices for which accumulated research is sufficient to support recommendations and those for which greater uncertainty remains. The goal of this article is to raise the quality of SP studies used to support decision making and promote research that will further enhance the practice of these studies worldwide.

Differential Attention to Attributes in Utility-Theoretic Choice Models

We show in a theoretical model that benefits of allocating additional attention to evaluating the marginal attribute with in choice set depend upon the expected utility loss from making a suboptimal choice as a result of ignoring that incremental attribute. Guided by this analysis, we then develop a very general and practical empirical method for measuring the individuals propensity to attend to attributes. As a proof of concept, we offer an empirical example of our method using a conjoint analysis of demand for programs to reduce health risks. Our results suggest that respondents differentially allocate attention across attributes, as a function of the mix of attribute levels in a choice set. This behavior can cause researchers who fail to model attention allocation to incorrectly estimate the marginal utilities derived from selected attributes. This illustrative example is a first attempt to implement an attention-corrected choice model with a sample of field data from a conjoint choice experiment.

Evidence of Environmental Migration

In hedonic property value models, economists typically assume that changing perceptions of environmental risk should be captured by changes in housing prices. For long-lived risks emanating from point sources, however, many other features of neighborhoods seem to change as well. Households relocate in response to changes in perceived environmental quality. We consider spatial patterns in selected census variables over three decades in the vicinity of four Superfund sites. We find many examples of moving and staying behavior, inferred from changes in the relative concentrations of a wide range of socio-demographic groups in census tracts near the site versus farther away. (JEL Q53, R31, R11)

Euthanizing the Value of a Statistical Life

For economists, the term “value of a statistical life” (VSL) is an eminently reasonable label for the concept it describes. However, outside our discipline, this terminology has been singularly unhelpful. This article argues that there could be a considerable reduction in wasted resources if economists were to change this terminology to something less incendiary, and that this could help to increase the acceptance of benefit–cost analysis as an input to the decision-making process for environmental, health, and safety regulations. I propose that we change our standard unit of measurement and replace the VSL terminology with “willingness to swap (WTS) alternative goods and services for a microrisk reduction in the chance of sudden death.” Analogous terminology would be used for other types of risks to life and health. I also argue that economists’ continual pursuit of a single number for “the” VSL is misguided and can be misleading, especially if individual WTS is correlated with the magnitudes of the risk changes. Such “one-size-fits-all” VSLs also hinder our ability to understand the distributional consequences of risk-reducing policies or interventions. Estimates of aggregate risk reduction benefits need to reflect the particular type of risk reduction as well as the characteristics of the affected populations.