The criterion validity of willingness to pay methods: A systematic review and meta-analysis of the evidence

Lucy Kanya,Alex Lewin,Sabina Sanghera,Julia Fox-Rushby

doi:10.1016/j.socscimed.2019.04.015

Lucy Kanya, Alex Lewin + Show 2 more

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https://doi.org/10.1016/j.socscimed.2019.04.015

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Abstract

BackgroundThe contingent valuation (CV) method is used to estimate the willingness to pay (WTP) for services and products to inform cost benefit analyses (CBA). A long-standing criticism that stated WTP estimates may be poor indicators of actual WTP, calls into question their validity and the use of such estimates for welfare evaluation, especially in the health sector. Available evidence on the validity of CV studies so far is inconclusive. We systematically reviewed the literature to (1) synthesize the evidence on the criterion validity of WTP/willingness to accept (WTA), (2) undertake a meta-analysis, pooling evidence on the extent of variation between stated and actual WTP values and, (3) explore the reasons for the variation. MethodsEight electronic databases were searched, along with citations and reference reviews. 50 papers detailing 159 comparisons were identified and reviewed using a standard proforma. Two reviewers each were involved in the paper selection, review and data extraction. Meta-analysis was conducted using random effects models for ratios of means and percentage differences separately. Meta-bias was investigated using funnel plots. ResultsHypothetical WTP was on average 3.2 times greater than actual WTP, with a range of 0.7–11.8 and 5.7 (0.0–13.6) for ratios of means and percentage differences respectively. However, key methodological differences between surveys of hypothetical and actual values were found. In the meta-analysis, high levels of heterogeneity existed. The overall effect size for mean summaries was 1.79 (1.56–2.04) and 2.37 (1.93–2.80) for percent summaries. Regression analyses identified mixed results on the influence of the different experimental protocols on the variation between stated and actual WTP values. Results indicating publication bias did not account for differences in study design. ConclusionsThe evidence on the criterion validity for CV studies is more mixed than authors are representing because substantial differences in study design between hypothetical and actual WTP/WTA surveys are not accounted for.

Highlights

Cost-benefit analysis (CBA) of public investments requires measurement of aggregate willingness to pay (WTP) (Slothuus, 2000)
This paper presents a narrative and quantitative systematic review and meta-analysis assessing the criterion validity of WTP methods
This review shows that considerable research has focussed on the criterion validity of contingent valuation (CV) methods since the late 1990s, with most papers from the health sector appearing after 2000

Summary

Introduction

Cost-benefit analysis (CBA) of public investments requires measurement of aggregate WTP (Slothuus, 2000). The CV method allows the assignment of a monetary value to the benefits attached to a public good or service for comparison with its costs (Mitchell and Carson, 1989). In this way, the method enables the estimation of economic value for a wide range of commodities not traded in markets (Slothuus et al, 2002). Conclusions: The evidence on the criterion validity for CV studies is more mixed than authors are representing because substantial differences in study design between hypothetical and actual WTP/WTA surveys are not accounted for

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Discussion

Conclusion