Abstract
Sensitivity to scope is considered a desirable property of contingent valuation studies and often treated as a necessary condition for validity. We first provide an overview of scope insensitivity explanations put forth in the environmental valuation literature. Then we analyze data from a contingent valuation survey eliciting willingness-to-pay to prevent oil spills of four different magnitudes in Arctic Norway. In the baseline analysis, the scope inference is ambiguous. There is only statistical difference in willingness to pay to avoid a very large versus small oil spill (NOK 1869 and NOK 1086, respectively). However, further explorations show that several confounding factors suggested in the literature influence the scope inference. The scope sensitivity improves when we control for subjective probabilities of amenity provision, exclude respondents based on the debriefing questions, take into consideration the sample sizes, and impose diminishing marginal utility. Overall, the analysis supports an emerging view in the contingent valuation literature suggesting that statistical scope insensitivity is not a sufficient reason for deeming a study invalid.
Highlights
Basic microeconomic intuition suggests that “It is reasonable to assume that larger amounts of commodities are preferred to smaller ones” (Mas-Colell, Whinston, and Green 1995)
While there are various ways these could be classified, we do so into four broad categories: (1) explanations related to microeconomic consumer theory, (2) explanations related to how people relate to environmental goods, (3) explanations related to survey design and model estimation, and (4) explanations related to insights from behavioral economics
Experience with oil spills is another case-specific dimension of how people relate to the environmental good
Summary
Basic microeconomic intuition suggests that “It is reasonable to assume that larger amounts of commodities are preferred to smaller ones” (Mas-Colell, Whinston, and Green 1995). The conceptual analysis in Amiran and Hagen (2010) argue that the scope elasticity should be anywhere between 0 and 1 in order to be consistent with strictly convex neoclassical preferences Both Whitehead (2016) and Borzykowski et al (2018) interpret elasticities higher than and statistically different from zero as “plausible” sensitivity to scope, while Burrows et al (2017) suggest “adequate” scope elasticities thresholds of 0.2 or 0.5. The paper contributes to the literature in the following two ways: The first part of the paper provides a broad overview of explanations for scope insensitivity that have been put forth in previous research This overview fills a gap in the literature as several authors have called for a thorough investigation of scope-confounding factors, which could potentially lead to false negatives (Carson and Mitchell 1995; Whitehead et al 1998; Heberlein et al 2005; Desvousges et al 2012; Whitehead 2016).
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