Preference uncertainty as an explanation of anomalies in contingent valuation: coastal management in the UK

Abstract

Directly asking respondents in contingent valuation surveys their willingness to pay is one of the few quantitative methods available to assess full economic value (including both use and non-use values) of non-market environmental goods. It therefore remains vitally important to better understand the reasons for consistently observed violations of procedural invariance in such surveys. This paper describes an empirical experiment designed to examine whether uncertainty might provide an explanation for three commonly observed violations of procedural invariance in contingent valuation. In each case, we present a plausible explanation for each anomaly through decision heuristics brought about by respondents trying to answer the question truthfully when their underlying preferences are stable but uncertain. Using a novel semi-parametric estimator, we find little evidence to support the idea that anomalies can be resolved through an uncertainty explanation, but our experiment provides noteworthy insights into the ways uncertain preferences may be shaped by the nature of contingent valuation questions.