The effect of payer units on the willingness to pay in a contingent valuation survey

Abstract

ABSTRACTThis study shows that a bias occurs due to the ambiguity of payer units in terms of the willingness to pay (WTP) for the provision of environmental goods in contingent valuation surveys. We use forest conservation in Shiga Prefecture, Japan as evaluation target and set up a contingent valuation survey based on three different questions that depend on the assumed payer unit (household, individual, or “strictly” individual unit). “Strictly” means the individual and household payer units are both included in the question. The results show no significant differences in WTP between household and individual payer units, while the individual WTP is more than the “strictly” individual. Assuming that respondents’ income evaluation and environmental quality recognition are correct, respondents will respond with individual WTP even if they are asked questions about household WTP. Moreover, there exists a difference in the WTP of individuals depending on whether other household members have made any payments. We called these difference “payer unit bias.” Furthermore, the survey reveals an underestimation of the aggregated value of environmental goods for household units. Therefore, it can be concluded that the contingent valuation survey should consider payer units.