Reply to “a comment on ‘three reasons to use annual payments in contingent valuation’”

Abstract

Whitehead (2017) suggests the contingent valuation (CV) data from Egan et al. (2015) lacks theoretical validity and has a “fat tails” problem, while also questioning our conclusion that CV surveys using annual payments produce willingness to pay (WTP) estimates that better match consumer surplus estimates from a travel cost model. In this reply, we use likelihood ratio tests to show that our CV data is theoretically valid. We use the Turnbull and Kriström distribution-free estimators to show that our CV data generate economically significant WTP estimates with small standard errors. Finally, we apply the sensitivity analyses from our original paper to Whitehead's results. These sensitivity analyses overwhelmingly support our original conclusion in favor of using annual payments in CV surveys.