Comparing Three Approaches That Generate Bids for the Referendum Contingent Valuation Method

Abstract

Two Monte Carlo willingness-to-pay ( WTP) models were constructed to compare three approaches that generate bids for the referendum CVM. In the first model, WTP was normally distributed, and in the second, was lognormally distributed. The bid approaches were those of K. L. Boyle, M. P. Welsh, and R. C. Bishop, ( Land Econom. 64, 94-98, 1988), J. C. Cooper ( J. Environ. Econom. Management 24, 25-40, 1993), and an ad hoc third approach. Some properties of these approaches were discussed. WTP estimates from the three approaches were compared to the true value. Results indicated that Boyle et al.′s approach was preferred, especially when variation in WTP was low. Estimates from the three approaches became more compatible as WTP variability and sample size increased.