Using Donation Mechanisms to Value Nonuse Benefits from Public Goods

Abstract

This paper discusses an experiment in which the value for an unfamiliar environmental good, whose total value has a large nonuse component, is verified using a revealed-preference method. As we were unable to observe preferences via an incentive compatible mechanism, we collected voluntary contributions toward the provision of the good. We make a case for interpreting these contributions as a “theoretical lower bound” on the value of the public good and estimate the lower bound. We also investigate whether we can use contingent donation data to estimate such lower bounds on values. We used a follow-up to the contingent donation question about the respondent's level of certainty with respect to her response to the contingent donation question. The results of this study suggest that use of the follow-up certainty question to differentiate respondents who would actually donate from those who would not is a promising approach to estimating a lower bound to Hicksian surplus measures.