Dichotomous Choice Contingent Valuation Method Research Articles

Bias and efficiency of single versus double bound models for contingent valuation studies: a Monte Carlo analysis

The dichotomous choice contingent valuation method can be used either in the single or double bound formulation. The former is easier to implement, while the latter is known to be more efficient. We analyse the bias of the ML estimates produced by either model, and the gain in efficiency associated to the double bound model, in different experimental settings. We find that there are no relevant differences in point estimates given by the two models, even for small sample size. The greater efficiency of the double bound is confirmed, although differences tend to reduce by increasing the sample size. Provided that a reliable pretest is conducted, and the sample size is large, use of the single rather than the double bound model is warranted.

Bias and Efficiency of Single vs Double Bound Models for Contingent Valuation Studies: a Monte Carlo Analysis

The Dichotomous Choice Contingent Valuation Method can be used either in the single or double bound formulation. The former is easier to implement, while the latter is known to be more efficient. We analyse the bias of the ML estimates produced by either model, and the gain in efficiency associated to the double bound model, in different experimental settings. We find that there are no relevant differences in point estimates given by the two models, even for small sample size, and no estimator can be said to be less biased than the other. The greater efficiency of the double bound is confirmed, although differences tend to reduce by increasing the sample size. Provided that a reliable pre-test is conducted, and the sample size is large, use of the single rather than the double bound model is warranted.

Valuation of Nature-Based Tourism Resources Using Dichotomous Choice Contingent Valuation Method. Choong-Ki Lee. Tourism Management, vol. 18, no. 8, December 1997, pp. 587-92. Elsevier Science Customer Support Department, P.O. Box 945, New York, NY 10010. $640 annual subscription

Valuation of Nature-Based Tourism Resources Using Dichotomous Choice Contingent Valuation Method. Choong-Ki Lee. Tourism Management, vol. 18, no. 8, December 1997, pp. 587-92. Elsevier Science Customer Support Department, P.O. Box 945, New York, NY 10010. $640 annual subscription

Experimental Results on Expressed Certainty and Hypothetical Bias in Contingent Valuation

Use of the contingent valuation method is controversial among economists because it is based on hypothetical rather than real choices. Previous experiments have suggested that the commonly used dichotomous choice contingent valuation method leads to hypothetical bias, i.e., overestimates the real willingness to pay. We carried out an experiment to compare the dichotomous choice contingent valuation method with real purchase decisions for a consumer good. We confirm previous findings that hypothetical yes responses overestimate real purchase decisions, but we cannot reject the null hypothesis that definitely sure yes responses correspond to real purchase decisions.

Experimental Results on Expressed Certainty and Hypothetical Bias in Contingent Valuation

Use of the contingent valuation method is controversial among economists because it is based on hypothetical rather than real choices. Previous experiments have suggested that the commonly used dichotomous choice contingent valuation method leads to hypothetical bias, i.e., overestimates the real willingness to pay. We carried out an experiment to compare the dichotomous choice contingent valuation method with real purchase decisions for a consumer good. We confirm previous findings that hypothetical yes responses overestimate real purchase decisions, but we cannot reject the null hypothesis that definitely sure yes responses correspond to real purchase decisions.

Comparing the Economic Value of Mountain Biking Estimated Using Revealed and Stated Preference

This research compares non-market valuation techniques by applying a count data travel cost method (TCM) and dichotomous choice contingent valuation method (CVM) to a form of recreation for which it has not been previously applied: mountain biking. Due to mountain biking's increasing popularity these estimates of benefits may be useful in addressing conflicts. One of the most famous mountain biking sites in the US (Moab, Utah) was chosen as the site for which to apply these two models. The benefits that were estimated for trips taken in the spring of 1996 are US$205 and US$235,for the TCM and CVM, respectively.These values are not statistically different using conventional significant levels.

Valuation of nature-based tourism resources using dichotomous choice contingent valuation method

The purpose of this paper is to measure the potential revenue from nature-based tourism resources in the environmentally sensitive area of Mt Minju, South Korea. A dichotomous choice contingent valuation method was employed to estimate the mean willingness-to-pay, contingent on a hypothetical market scenario. The empirical results show that the economic value of nature-based tourism resources was estimated at 5905 Won ( ca US$ 7) per visitor. This implies that the significant economic value of natural resources will be lost from any large-scale development by degrading natural environments. In addition to the value of natural resources, nature-based tourism also provides the locally owned small tourist businesses with lower leakages than the externally owned large-scale ones. Low leakage implies that local residents gain more direct income from nature-based tourism.

An Economic Evaluation of Alternative Methods of Household Solid Waste Disposal: An Evaluation of Kitami City, Hokkaido using the Double-Bounded Dichotomous Choice Contingent Valuation Method

In order to reduce municipal waste generation at the source, it is important for the recycling rate and in-home disposal rate to rise. With regards to recycling, with the implementation of new systems in recent years, a generally supportive social consensus has formed. On the other hand, with regards to raising the in-home disposal rate, because of many factors that vary from region to region, it is difficult to achieve uniform progress in this area across the nation. Moreover, apart from regional differences there is also a certain amount of user opposition to be expected against efforts to transfer some of the burden of waste management costs to the individual user. In order for policy in this area to make progress, along with continuous development of waste management technology, it is important to make users aware of the costs involved and encourage them not just to consider waste management as a no-cost municipal service.Using the Double-Bounded DCCVM (Dichotomous Choice Contingent Valuation Method), we have attempted to elucidate the value in monetary terms at which the users, or the demand side, estimate household solid waste disposal services to be worth-services which have been treated up until now as non-marketable. We have also attempted to elucidate factors that influence users' assessment of the benefit value of the services and to what degree these factors influence their willingness to pay for them.According to the results of this evaluation, the following points became clear. First, since waste management service is considered in economic terminology, as a superior goods of high necessity, the amount respondents were willing to pay tended to increase with income level. Secondly, there was a tendency for respondents who actively practiced waste reduction and who recognized waste disposal problems as serious to be more willing to pay for such services than those who did not. Also, respondents living in single dwelling unit homes displayed a lower willingness to pay than those living in multiple dwelling unit complexes such as apartments. Third, the factor of possible extended future benefit from the services (long term residence in Kitami City), proved to have a significant influence on the amount respondents were willing to pay for waste disposal services. Fourth, when the average amount that respondents indicated in the survey, they were willing to pay for waste disposal services was compared to the actual expenditure per household of Kitami City on household solid waste disposal, the former was found to be higher by an estimated absolute value of equivalent surplus of ¥12, 167 per household per year.

Analysing Conflict between Cultural Heritage and Nature Conservation in the Australian Alps: A CVM Approach

The contingent valuation method (CVM) can be useful for assessing the non-market economic values associated with government land use decisions. A particular variant of CVM, which is based on dichotomous choice responses, has become widely used. Previous studies have employed a variety of techniques for analysing dichotomous choice CVM data to produce estimates of economic welfare changes. This paper summarizes these analytical options, and illustrates their application in a case study concerning cattle grazing on the Bogong High Plains in the Australian Alps. This case study is one of the few to assess the non-market economic value of cultural heritage conservation using contingent valuation, and is also unusual in that the competing values are both non-market in character. Nature conservation and heritage values were separately measured using two independent surveys. Mean willingness to pay for nature conservation and cultural heritage were estimated using a range of parametric and nonparametric methods.

Joint estimation of contingent valuation survey responses

Hanemann's utility difference model for the dichotomous choice contingent valuation method is modified to account for interrelationships between responses to a set of contingent valuation questions. A nonlinear seemingly unrelated regression model is presented to jointly estimate the probit models and to derive WTP from the CV responses. The model is used to test and impose restrictions derived from economic theory on the utility difference model. Mean WTP estimates for three different types of changes in the quality of California deer hunting were uniformly lower for the joint response probit model compared to a set of independent probit models.

The economic value of moose hunting in Newfoundland

The dichotomous choice contingent valuation method was used to determine the net economic value of moose hunting in Newfoundland. Specific questions addressed the value of changes in moose hunting that could result from forest management. Three statistical models were used to determine mean and median welfare measures for four different contingent valuation models. The values obtained are similar to other studies that have obtained economic values for big-game hunting. The results show that although differences in welfare measures exist between statistical models, the mean and median values within a specification appear to be relatively robust. The results also suggest that factors affected by forest management (e.g., moose populations) provide more substantial benefits than factors under the control of the administrative agency (e.g., season length).

A Comparison of Approaches to Calculating Confidence Intervals for Benefit Measures from Dichotomous Choice Contingent Valuation Surveys

This paper compares the performance of four approaches to calculating confidence intervals around dichotomous choice contingent valuation method (DC CVM) benefit estimates. The performance of the approaches is compared using Monte Carlo simulation techniques for the two most common specifications for the welfare estimate. The results indicate that all four methods tended to perform well on average but the methods differed in the frequency with which they performed well. The results indicate the best choice depends on the sample size, on the distribution of the welfare estimate, and on the choice of functional form for the welfare estimate.

A bioeconomic model for estimating the optimal level of deer and tag sales

This paper presents a dynamic model that determines the optimal number of deer hunting permit sales, subject to the objective of maximizing the discounted economic benefits stream from both the consumptive and nonconsumptive uses of deer. This bioeconomic model integrates economic benefits estimated using the dichotomous choice contingent valuation method with biological growth constraints on deer. Using a hunting zone in California as a case study, the model found that the optimal levels of buck hunting permits sold should change on a rotational basis over time and that the current practice of not selling doe hunting permits for that zone is non optimal.

Sensitivity of Willingness-to-Pay Estimates to Bid Design in Dichotomous Choice Valuation Models: Comment

In their paper, Cooper and Loomis (1992) claim that willingness to pay (WTP) estimates derived using the dichotomous choice contingent valuation method (DC CVM) are very sensitive to the bid values specified, especially the bid values in the upper range of the WTP distribution. Their claim is supported using examples from ten WTP questions taken from three different surveys. Each of these WTP questions was a dichotomous choice question with 15-20 different bids offered, ranging from $2 to $1,200. They then show that when some of these bid values are dropped from the data sets, the WTP estimates resulting from logit estimation differ, sometimes substantially, from the estimates derived using the full data sets. They find particularly large variation in WTP estimates when the top bids are dropped, and claim that in these cases, WTP is substantially underestimated. Their results, they say, should as a note of warning for DC CVM Indeed, these results should serve as a warning for DC CVM researchers. The bid values in the tails of the distribution are highly influential points, not in a reliable way, as Cooper and Loomis suggest, but rather in a distorting way. Bid values in the tails increase the variances of the estimators of the parameters and, therefore, of WTP. Consider, for example, a bid value offered at the 1 percent right tail of the WTP distribution. In this case, we expect that 100 observations would have to be drawn at this point in order to get one positive response. It is easy to see that if more than one positive response occurred in this case, the tail, and therefore the entire distribution, would be thrown off. This strong influence of the tails is what increases the variance of the estimators, and in small samples, can cause bias. When Cooper and Loomis dropped the upper and lower bid values from their data, had they also compensated for the reduced sample size, they would have actually improved the efficiency of their estimators, provided their model specification was correct. The fact that the removal of the upper and lower bid values strongly influenced the resulting estimators is probably a result of the wrong model being fitted to the data. Cooper and Loomis assume WTP is distributed logistically. Many CVM studies have concluded that WTP is actually distributed asymmetrically, with a long right tail. The response rates in the upper tails that Cooper and Loomis report indicate that this is probably the case with their data. If their data actually were drawn from an underlying logistic distribution, the removal of particular bid values should not have influenced the estimation so much. This will be confirmed in our analysis below. The fact that these points are so influential indicates that either the model specified is incorrect, the responses in the tails are biased upward, or in all ten cases, the responses represent statistical anomalies. In this comment, we offer alternative analyses to those provided by Cooper and Loomis, and we suggest that the sensitivity they find in WTP estimates can be explained. In Section II, the influence of particular bid values is investigated using a data set from Kristr6m (1990a). It is shown that when particular bid values are dropped from the sample, the WTP estimates are not statistically different. In Section III,

Optimal Bid Selection for Dichotomous Choice Contingent Valuation Surveys

This paper develops a model for optimal survey design for the dichotomous choice contingent valuation method that finds the bid amounts as well as the sample sizes corresponding to each bid. The model uses an iterative procedure to select the survey design that minimizes the mean square error of the welfare measure. A set of Monte Carlo simulations shows that the model produces significantly lower mean squared errors for the welfare estimate than the next best model produces. Survey design under alternative assumptions regarding the statistical distribution of the welfare measure is also addressed. The model produced significantly different survey designs depending on whether the distribution was assumed to be symmetric or asymmetric.

Sensitivity of Willingness-to-Pay Estimates to Bid Design in Dichotomous Choice Contingent Valuation Models

This paper addresses the sensitivity of dichotomous choice contingent valuation method (DC CVM) based mean willingness-to-pay (WTP) estimates to the DC CVM sample design and to alternative measures of WTP. This issue is examined both analytically and empirically. The analysis of ten different DC CVM data sets revealed a sensitivity in estimated mean WTP to the sample design and to the measure chosen to calculate mean WTP.