Dichotomous Choice Contingent Valuation Questions Research Articles

Sequence Effects in the Valuation of Multiple Environmental Programs Using the Contingent Valuation Method

In contingent valuation, the willingness to pay for hypothetical programs may be affected by the order in which programs are presented to respondents. With inclusive lists, economic theory suggests that sequence effects should be expected. However, when policy makers allocate public budgets to several environmental programs, they may be interested in assessing the value of the programs without the valuations being affected by the order in which the programs are presented. Using single-bounded dichotomous choice contingent valuation questions, we show that if respondents have the possibility to revise their willingness-to-pay answers, sequence effects are mitigated. <i>(JEL Q51, Q54)</i>

Environment as Cultural Heritage: The Armenian Diaspora's Willingness-to-Pay to Protect Armenia's Lake Sevan

This paper presents a study of willingness-to-pay of the Armenian Diaspora in the United States to protect Armenia's Lake Sevan, a unique and precious symbol of the Armenian cultural heritage. Dichotomous choice contingent valuation questions were asked by mail surveys to elicit respondents'willingness to pay for the protection of Lake Sevan. The results show that on average, each household of the Armenian Diaspora in the United States would be willing to provide a one-time donation of approximately US$80 to prevent a further degradation of Lake Sevan, and approximately US$280 to restore the quality of the lake by increasing its water level by 3 meters.

Mountain substitutability and peak load pricing of high alpine peaks as a management tool to reduce environmental damage: A contingent valuation study

High alpine peaks throughout the world are under increasing environmental pressure from hikers, trekkers, and climbers. Colorado's “Fourteeners”, peaks with summits above 14,000 feet are no exception. Most of these peaks have no entrance fees, and reach ecological and social carrying capacity on weekends. This paper illustrates how a series of dichotomous choice contingent valuation questions can be used to evaluate substitutability between different alpine peaks and quantify the price responsiveness to an entrance fee. Using this approach, we find that peak load pricing would decrease use of popular Fourteeners in Colorado by 22%. This reduction is due almost entirely to substitution, rather than income effects. There is also price inelastic demand, as 60% of the hikers find no substitution for their specific Fourteener at the varying cost increases posed in the survey. The no substitute group has a mean net benefit of $294 per hiker, per trip, considerably higher than visitor net benefits in most recreational use studies.

Economic valuation of health risk exposure of restaurant users in Dhaka city

The aim of the study presented in this paper is to estimate the economic cost of health risk exposure of the restaurant users in Dhaka city. In a large-scale survey, 400 restaurant users in Dhaka city belonging to lower-middle to high income group were asked for their preferences for a hypothetical ‘Food Safety Inspection Programme’ using closed ended dichotomous choice contingent valuation questions. The study reveals an average estimated willingness to pay of Tk31 (US$ 0.5) which is 13% of the average restaurant bill per visit per person. Aggregating the overall willingness to pay estimate across the whole population, a reduction in restaurant food-related health risk results in a total economic benefit of Tk2,250 million (US$33million) per year. The study, furthermore, reveals that the respondent' willingness to pay for the Inspection Programme varies with the degree of health risk exposure, respondent' income level, frequency of restaurant visits, the disutility from health risks and the levels of self-protection. Two different health risk indicators, subjective (respondent perceived probability of becoming ill after eating in a restaurant) and objective (experience of negative health incidences from low quality restaurant food), have been used to test the consistency of influence of health risk exposure on stated willingness to pay. Better model fit has been observed with the objective health risk exposure. The results from the statistical models indicate that the offered bid amounts (additional amount of money that the restaurant users need to pay in order to finance the Inspection Programme) affects willingness to pay negatively. We find income, frequency of restaurant visits and health consciousness influencing willingness to pay for the Inspection Programme positively. Finally, our results confirm the hypothesis that willingness to pay for health risk reduction varies positively with the levels of risk exposure independent of the type of indicators (subjective or objective) we use to measure health risk.

Modeling Hidden Alternatives in Random Utility Models: An Application to "Don't Know" Responses in Contingent Valuation

Wedevelop a multinomial logitmodel with missing information that can be used to test for hidden alternatives in random utility models and contingent valuation analysis. To illustrate our latentchoice technique, we focus on the “don’t know” responses in dichotomous choice contingent valuation questions. In this version of the latent-choice model, we probabilistically reassign “don’t know” responses to either the “yes” or “no” categories (or leave them in the “don’t know” category), if indicated by the data. We find that in our two studies a statistically significant number of the “don’t know” responses are actually “no” responses.

Contingent valuation, net marginal benefits, and the scale of riparian ecosystem restoration

A study was undertaken to estimate the benefits and costs of riparian restoration projects along the Little Tennessee River in western North Carolina. Restoration benefits were described in terms of five indicators of ecosystem services: abundance of game fish, water clarity, wildlife habitat, allowable water uses, and ecosystem naturalness. A sequence of dichotomous choice contingent valuation questions were presented to local residents to assess household willingness to pay increased county sales taxes for differing amounts of riparian restoration. Results showed that the benefits of ecosystem restoration were a non-linear function of restoration scale and the benefits of full restoration were super-additive. We estimated the costs of riparian restoration activities by collecting and analyzing data from 35 projects in the study area. After adjusting our estimated valuation function for socio-economic characteristics of the local population, the benefit/cost ratio for riparian restoration ranged from 4.03 (for 2 miles of restoration) to 15.65 (for 6 miles of restoration). Riparian restoration in this watershed is therefore an economically feasible investment of public funds at all measured spatial scales.

Does don't know mean no? Analysis of 'don't know' responses in dichotomous choice contingent valuation questions

The ‘don't know’ response option in contingent valuation dichotomous choice questions is analysed using data from both willingness to pay and willingness to accept studies. An empirical analysis is conducted to determine whether respondents are stating a response similar to yes or no responses or a middle response. It is found that don't know responses are similar to no responses in the willingness to pay study. In the willingness to accept study, it is found that the ‘don't know’ responses are similar to a middle response. It is further suggested that researchers consider calculating ambivalence bounds when a don't know response is a middle response.

Assessment of the relationship between measures of disease severity, quality of life, and willingness to pay in asthma.

The primary objective was to evaluate the relationship between willingness-to-pay (WTP), quality-of-life (QOL), and disease-severity measures in patients with asthma. The hypothesis studied was that patients with asthma with more severe disease are willing to pay more for a hypothetical cure of asthma than those with less severe disease. DESIGN SETTING/PATIENTS AND PARTICIPANTS: One hundred patients with asthma were recruited from community pharmacies in Kentucky for 30-minute face-to-face interviews. Spirometry assessed objective disease severity in terms of pulmonary function, while a multiple choice question measured subjective disease severity. The Medical Outcomes Study 36-item Short Form (SF-36) health survey and Asthma Technology of Patient Experience (Asthma TyPE) measured quality of life. WTP was obtained via a dichotomous choice contingent valuation question. In this exploratory evaluation, WTP was significantly related to both objective disease severity (p = 0.02) and subjectively assessed disease severity (p = 0.01). For objective disease severity the mean monthly WTP was dollars US90 for mild asthma, dollars US131 for moderate asthma and dollars US331 for severe asthma and for subjective disease severity the mean monthly WTP was dollars US48 for mild asthma, dollars US166 for moderate asthma and dollars US241 for severe asthma. The results suggest that the WTP for a cure from asthma is related to both objective and subjective disease severity. These findings contribute to the case for construct validity of the dichotomous choice contingent valuation method in the healthcare sector.

PAR13: HYPOTHETICAL VERSUS REAL WILLINGNESS TO PAY IN THE HEALTH CARE SECTOR: RESULTS FROM A FIELD EXPERIMENT

OBJECTIVE: Despite increased use in the health care sector (HCS), the contingent valuation (CV) method remains controversial. The nucleus of the controversy is the extent to which hypothetical choices in the CV method mimic real economic choices. Correspondence between hypothetical and real willingness to pay (WTP) has been studied for private and environmental goods. These experiments demonstrate that dichotomous choice (DC) CV questions lead to hypothetical bias (overestimation of real WTP). Hypothetical bias has not been assessed in the HCS. We conducted an experiment directly comparing responses to a DC CV question with real purchase decisions using a pharmacist provided asthma management service as the item being valued. We examined whether DC CV questions lead to hypothetical bias for this good, and we tested whether “definitely sure” hypothetical yes responses, as identified in a follow-up question, correspond to real yes responses. METHODS: 172 subjects with asthma were recruited from 10 Kentucky community pharmacies. Subjects received either a DC CV question or were given the opportunity to actually purchase the service. Three different prices were used: $15, $40, and $80. RESULTS: In the hypothetical group 38% of subjects stated they would purchase the good at the given price, but only 12% of subjects in the real group purchased the good (p = 0.000). We cannot, however, reject the null hypothesis that “definitely sure” hypothetical yes responses correspond to real yes responses. CONCLUSIONS: The DC CV method overestimates WTP in the HCS, but it may be possible to correct for this by sorting out “definitely sure” yes responses.

PAR14: ASSESSMENT OF THE RELATIONSHIP BETWEEN DISEASE SEVERITY, QUALITY OF LIFE AND WILLINGNESS TO PAY IN ASTHMA

OBJECTIVE: The primary objective was to evaluate the relationship between willingness to pay (WTP), quality of life (QOL), and disease severity measures in asthma patients. The hypothesis studied was that asthma patients with more severe disease, as measured objectively via forced expiratory volume percent predicted (FEV1%), are willing to pay more for a hypothetical cure from asthma than those with less severe disease. METHODS: One-hundred asthmatic patients were recruited from community pharmacies in Kentucky for 30 minute face-to-face interviews. Spirometry was used to assess objective disease severity while a multiple choice question assessed subjective disease severity. The Short Form 36 (SF-36) and Asthma Technology of Patient Experience (Asthma TyPE) measured QOL. WTP was obtained via a dichotomous choice contingent valuation question. RESULTS: WTP was significantly related to both objective disease severity (p = 0.02) and subjectively assessed disease severity (p = 0.01). For objective disease severity the mean monthly WTP was $90 for mild asthma, $131 for moderate asthma and $331 for severe asthma; and for subjective disease severity the mean monthly WTP was $48 for mild asthma, $166 for moderate asthma and $241 for severe asthma. A majority of the QOL measures were correlated with WTP. CONCLUSIONS: The results suggest that the WTP for a cure from asthma is related to both objective and subjective disease severity.

Bound and path effects in double and triple bounded dichotomous choice contingent valuation

Dichotomous choice contingent valuation questions are relatively inefficient in that large sample sizes are required for a given level of estimation precision. An increasingly common approach to this problem is to supplement the initial question with subsequent dichotomous choice questions in a multiple-bound design. However, a number of commentators have suggested that such designs may generate responses which are internally inconsistent in that the distribution of underlying preferences implied by answers to the initial question may not be the same as that implied by the entire sequence of replies. We consider a variety of potential causes of such inconsistencies and use data from a contingent valuation study with two follow-ups and post survey debriefing focus groups to test both the effects caused by moving from one bound to another and those caused when respondents follow either the bid-increasing path generated by a positive response at a given bid amount, or the bid-decreasing path generated by negative responses. Results indicate that both bound and path effects are significant and generate a pattern corresponding to certain of the causes of inconsistency identified in the paper. Conclusions for the future application of such designs are presented.

Hypothetical versus real willingness to pay in the health care sector: results from a field experiment

We conducted a field experiment comparing hypothetical and real purchase decisions for a pharmacist provided asthma management program among 172 subjects with asthma. Subjects received either a dichotomous choice contingent valuation question or were given the opportunity to actually enroll in the program. Three different prices were used: US$ 15, 40, and 80. In the hypothetical group, 38% of subjects said that they would purchase the good at the stated price, but only 12% of subjects in the real group purchased the good ( p=0.000). We cannot, however, reject the null hypothesis that “definitely sure” hypothetical yes responses, as identified in a follow-up question, correspond to real yes responses. We conclude that the dichotomous choice contingent valuation method overestimates willingness to pay, but that it may be possible to correct for this overestimation by sorting out “definitely sure” yes responses.

Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations

Modelling household behaviour with the data from dichotomous choice contingent valuation (DCCV) surveys is often complicated by zero willingness to pay (WTP) responses in the sample. To deal with the zero responses, a two-equation model is considered, which incorporates a two-level decision structure, a decision on whether to participate in having WTP and a decision on the WTP amount conditional on deciding to participate, and two separate stochastic processes that determine the probability and conditional level of WTP are featured. The model is empirically applied to household survey data, in which the DCCV questions concerned the benefits of air quality improvement in Korea. To put the issue of the two-equation model in perspective, this paper also experiments with economic and econometric specifications: utility theoretic restriction and heteroscedasticity. It is shown how failure to allow for the restriction distorts aggregate benefit estimates and the existence of heteroscedasticity in error term is found.

An experimental comparison of dichotomous choice contingent valuation questions and real purchase decisions

In this paper the results of an experiment comparing the dichotomous choice (DC) contingentvaluation (CV) approach with real purchase decisions for a consumer good are reported. In addition to comparing the standard DC CV approach with real decisions, we also test the hypothesis that a more conservative interpretation of the DC approach, where only absolutely sure yes responses are counted as yes responses, correctly predicts real purchase decisions. The results show that the hypothetical yes responses overestimate the real yes responses and that the hypothetical absolutely sure yes responses underestimate the real yes responses.

How large is the extent of the market for public goods: evidence from a nationwide contingent valuation survey

To assess the extent of the geographic area over which to sum vertically the public-good benefits of removing two dams and restoring salmon populations, households were surveyed throughout the US. Households were asked a dichotomouschoice contingent-valuation question regarding their willingness to pay higher federal taxes for ten years to remove the dams and restore salmon populations. While the distance from the site of the dam removal is statistically significant and negative in the logit willingness-to-pay equation, benefits per household fall off slowly and the extent of the market is nationwide. With a majority of households living outside the immediate area of the dam, the rest of the US households reflect 97% of the national benefits for dam removal and salmon restoration. This example suggests that failure to account for the national public-good market can result in a serious underestimate of the value of public goods.

Comparison of Mail and Telephone-Mail Contingent Valuation Surveys

A traditional mail and combined mail booklet with telephone interview mode are compared with respect to overall survey and individual item response rates, sample demographics, recreation participation behavior and willingness to pay (WTP) for improvement of wildlife and fisheries resources in California. WTP for five wildlife programs was measured with dichotomous choice CVM questions. The two survey modes yield statistically significant differences in overall survey response rate and response rate on dichotomous choice contingent valuation questions. Three of the five logit equations and mean willingness to pay amounts are statistically different, with the mail sample having nearly double the willingness to pay of the phone sample. Correcting for demographic, attitudinal and recreation activity participation differences between the samples results in only a slight narrowing of the mail and telephone estimates of willingness to pay.