Heterogeneity In Willingness To Pay Research Articles

Identifying Heterogeneous Willingness to Pay for New Energy Vehicles Attributes: A Discrete Choice Experiment in China

New energy vehicles (NEVs) have emerged as a promising solution to reduce carbon emissions and address environmental concerns in the transportation sector. In order to effectively accelerate market acceptance, it is crucial to prioritize the heterogeneity of consumer preferences for NEV attributes. This study employs the multinomial logit model (MNL) and latent class model (LCM) to investigate both observed and unobserved preference heterogeneity based on stated preferences obtained from a discrete choice experiment conducted across seven cities in China. Results from the MNL model indicate that all attributes significantly influence alternative utility. In particular, there are differences in the willingness to pay (WTP) for attributes of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). Analysis of MNL subgroups reveals observed heterogeneity in WTP for identical attributes among consumers from regions with different latitudes and markets with different NEV penetration rates. Furthermore, the LCM model uncovers unobserved preference heterogeneity by classifying respondents into four distinct classes and identifies specific socioeconomic variables associated with each class. The recognition of heterogeneous WTP for NEV attributes across vehicle types, regions, markets, and consumer classes provides important implications for formulating targeted policies that promote the sustainable development of the NEV industry.

Understanding and modeling willingness-to-pay for public policies to enhance road safety: A perspective from Pakistan

Evaluating road safety improvements becomes important because it can assist policymakers in allocating economic resources to improve safety and implementing effective policy interventions. As such, this study aims to estimate the value of road safety risk measures using a new modeling approach for willingness-to-pay (WTP). Specifically, this study integrates a machine learning technique (decision tree) with a correlated random parameters Tobit with heterogeneity-in-means model. The decision tree identifies a priori relationships for higher-order interactions, while the model captures unobserved heterogeneity and the correlation between random parameters. The proposed modeling framework examines the determinants of public WTP for improving road safety using a sample of car drivers from Peshawar, Pakistan. WTP for fatal and severe injury risk reductions is estimated and used to calculate the values of corresponding risk reductions, which can be used for monetizing the cost of road traffic crashes in the country. Modeling results reveal that most respondents are willing to contribute to road safety improvement policies. Further, the model also uncovers significant heterogeneity in WTP corresponding to the safer perception of the overall road infrastructure and perceived risk of accident involvement. Systematic preference heterogeneity is also found in the model by including higher-order interactions, providing additional insights into the complex relationship of WTP with its determinants. Further, the marginal effects of explanatory variables indicate different sensitivities toward WTP, which can help to quantify the impacts of these variables on both the probability and magnitude of WTP. Overall, the proposed modeling framework has a twofold contribution. First, the modeling framework provides valuable insights into the determinants of public WTP, mainly when the heterogeneous effects of variables are interactive. Second, its implementation and consequent findings shall help prioritize different road safety policies/projects by better understanding public sensitivity to WTP.

Estimating students’ valuation for college experiences

Quantifying the consumption value of college – the utility students derive from in-person instruction and on-campus social activities – has been challenging. We leverage the COVID-19 shock to elicit students’ intended likelihood of enrolling in higher education under different costs and possible states of the world, that vary in terms of class formats (i.e., in-person vs. remote instruction) and restrictions to campus social life. We show how such data can be used to recover students’ willingness-to-pay (WTP) for college-related activities in the absence of COVID-19, without parametric assumptions on the underlying heterogeneity in WTP. We find that the average WTP for in-person instruction (relative to a remote format) represents around 6.5% of the average annual net cost of attending university, while the average WTP for on-campus social activities is 10.2% of the average annual net costs. Lower-income and first-generation derive substantially lower value from university social life, partly due to time and resource constraints. Beyond providing an explanation for why college persistence rates may differ by socioeconomic background, our results have implications for how college costs should be structured.

Psychological distance and physical distance induced residents' heterogeneous willingness to pay for transboundary watershed ecosystem services in the Wei River Basin, China.

Under the framework of payment for transboundary watershed ecosystem services (ESs), identifying midstream and downstream residents' preference and willingness to pay (WTP) for ESs provided by the upstream is crucial for sustainable watershed management. The residents' preferences and WTP are not evenly distributed within the watershed. This study uses a choice experiment assessing the spatial impact of physical distance (including residents' watershed location and distance to waterbody) and psychological distance on residents' preference and WTP for the Wei River Basin ESs. The results showed that midstream and downstream residents' preference and WTP for the ecological attributes have a significant distance-decay effect, either the physical distance to the upstream exit or physical and psychological distance to the waterbody. However, compared with the residents in the midstream, the residents downstream have a stronger preference and WTP for upstream ecological governance. Besides, the distance-decay effect differs between urban and rural residents. There is a psychological distance-decay effect in rural residents' preference for water quality and a physical distance-decay effect in their preference for water quantity, entertainment area, and cost; there is a physical distance decay effect in urban residents' preference for entertainment areas. The above differences lead to heterogeneity in WTP and total economic value (TEV) for ESs. When calculating the TEV of the transboundary watershed ES and charging the public, policymakers should consider the location of the residents, the physical and psychological distance to the water body, and the difference between urban and rural areas.

Living environment shaped residents’ willingness to pay for ecosystem services in Yangtze River Middle Reaches Megalopolis, China

Profound understanding on the diversity of local residents’ willingness to pay (WTP) for ecosystem services (ESs) may aid evaluation of policy impacts by uncovering trade-offs and synergies for achieving sustainable environmental resource management. However, the reasons for the spatial preference heterogeneity of WTP are still unclear. In this study, an extensive survey with 4,580 residents in the Yangtze River Middle Reaches Megalopolis (YRMRM), central China, was carried out to investigate the public’s WTP to maintain and improve ESs. We identified key influencing factors and explored how they shaped the preference heterogeneity in WTP by random forest model and surface fitting method. Our results showed that 81.4% of residents reported WTP for ESs greater than zero. Water supply, waste treatment, food supply and raw material supply were the preferred ESs for residents. Living environment factors (i.e., extent of farmland, water and forest near the residence) were found as the key drivers of WTP. Proximity to farmland, water and forests resulted in high WTP values for a series of specific ESs. The reasons for the heterogeneity of WTP are (1) the difference in proximity to farmland, water and forest (i.e., the contributor to ESs), (2) the divergence of local residents’ preferences for ESs. This study disclosed the heterogeneity and causes of public preferences in YRMRM, which could help policy and decision makers to develop eco-compensation initiatives towards conservative and sustainable use of the environmental resources.

What Are People Willing to Pay for Social Sustainability? A Choice Experiment among Dutch Consumers

A relatively large number of studies has shown that consumers are willing to pay more for products that are certified as being environmentally or socially responsible, but most of these studies focus on the willingness to pay (WTP) for environmental benefits, while insights into the WTP for social benefits are limited. More research in this area will shed light on consumer choices and help policymakers to better direct the food industry toward social sustainability. In this paper, we carry out a Discrete Choice Experiment among Dutch consumers to measure consumer WTP for five social sustainability benefits; (1) no child labor; (2) liveable wage and safe working environment; (3) project for the education of workers; (4) equal wages for men and women; and (5) freedom to join a trade union. The novelty of our research in comparison with previous studies is that we aim to differentiate the WTP for various social standards instead of estimating an overall WTP for fair-trade labels. In addition to average price premiums per social standard, our latent class models also give insight into heterogeneity in WTP, or more specifically, stated price premiums by different groups (or market segments) in society. The results suggest that substantial price premiums for social sustainability benefits may exist, which currently are not reflected in food prices. Including price premiums for market products that fully incorporate societal costs of those products, so-called true prices or shadow prices, will decrease consumer demand for less-sustainable products and will lead to a fairer and more sustainable economic system. Our results also show that the price premiums may vary substantially between the various categories of social sustainability benefits and across products and market segments. Further research on assessing the motivations behind consumer choices for more-sustainable products is crucial here, especially for campaigns aimed at enhancing their market shares.

Willingness to pay for policies to reduce health risks from COVID-19: Evidence from U.S. professional sports.

Airborne transmission of the COVID-19 virus increased the need for health policies to reduce transmission in congregate settings associated with minimal risk before the pandemic. While a large literature estimates tradeoffs between policies designed to reduce negative health outcomes, no empirical research addresses consumer willingness to pay (WTP) for health policies designed to reduce airborne virus transmission. Using survey data from 1381 fans of professional sports, we estimate consumers' WTP for reduced likelihood of coronavirus transmission through mask and social distancing policies using a stated preference approach. The results indicate increased attendance likelihood if the venue requires masks and limits attendance, with significant heterogeneity in WTP across risk scenarios and sports. We characterize consumers as casual fans who prefer a mask requirement but are indifferent to capacity constraints, strong fans who are anti-maskers and prefer capacity constraints, and a second group of casual fans with positive WTP under both mask and limited capacity requirements. For example, casual fans' WTP for masking, $38 per National Basketball Association (NBA) game attended, is more than double their WTP for capacity constraints only. Strong fans' WTP for attending capacity constrained NBA games was $490, more than 400% higher than the pre-pandemic average WTP of $105.

Who cares and how much? Narrative for advances in aquatic ecosystem services through non-market valuation with spatial dimensions using a discrete choice experiment

Decision-making regarding valuation of ecosystems services regarding their improvements for life on planet could be exceptionally challenging as different disciplines and theoretical views consider value of ecosystems differently. To attain a better understanding of environmental quality status across Northwest China, a discrete choice experiment approach is carried out in the entire Wei River basin with a sample size of 900 households. A cluster of ecosystem services are put together in a planning alongside betterment in ecological conditions in a choice set. Random parameter logit models (RPL) are applied for estimating spatial heterogeneity in preferences and delta method is implemented to assess the willingness to pay (WTP) values of the sampled respondents for the improvements in the currently degraded ecosystem services. The results exhibit that preferences as well as WTP values are heterogenous at different spatial dimensions, for instance, water quality is highly valued in all selected regions followed by water loss and soil erosion intensity, while there exists heterogeneity in WTP for all other ecological attributes. Similarly, there exists heterogeneity in WTP between the sampled respondents of; upper, lower and middle basins as well as urban and rural areas. The lowest valued ecological attribute includes conditions of eco-tourism & forest park across all spatially distributed urban and rural areas, various regions and at sub-basins. The results indicated that households of the entire river basin are cautious concerning upgradation in the current degraded environmental quality as can be perceived from their corresponding WTP values. The categorical empirical results of our study hence suggest for the sustainable management and conservation of ecosystem services with better environmental quality.

Linking urban air pollution with residents’ willingness to pay for greenspace: A choice experiment study in Beijing

This study investigates the nexus between urban air pollution and residents’ preferences for greenspace. The two environmental issues could be linked through people’s general tastes for environmental amenities helping to determine residential location choice, implying that residents of heavily-polluted neighbourhoods may care less about environmental amenities in general, including greenspace. Alternatively, high pollution levels could force people to reduce their local outdoor activities and thereby devalue urban greenspace as local recreational resources. Finally, residents of severely-polluted areas may derive additional benefits from greenspace as trees can enhance air quality. To examine these issues, we undertook choice experiment surveys in Beijing to elicit willingness to pay (WTP) for three types of greenspace: a neighbourhood park near respondents’ homes, a city park in central Beijing and a national park outside the city. We then used air pollution data to help explain the spatial heterogeneity in WTP. Neighbourhood parks provide direct air purification services for communities nearby, and our results indeed suggest that respondents exposed to higher pollution levels have higher WTP for a new neighbourhood park. However, we failed to find evidence of a significant effect of pollution on WTP for a new city park or a new national park.

What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh

Abstract This study uses a choice experiment among 2,000 workers in Bangladesh to elicit willingness to pay (WTP) for job attributes: a contract, termination notice, working hours, paid leave, and a pension fund. Using a stated preference method allows calculation of WTP for benefits in this setting, despite the lack of data on worker transitions, and the fact that many workers are self-employed, which makes it difficult to use revealed preference methods. Workers highly value job stability: the average worker would be willing to forgo a 27 percent increase in income to obtain a one-year contract (relative to no contract), or to forgo a 12 percent increase to obtain thirty days of termination notice. There is substantial heterogeneity in WTP by type of employment and gender: women value shorter working hours more than men, while government workers place a higher value on contracts than do private-sector employees.

How to attract customers to buy green housing? Their heterogeneous willingness to pay for different attributes

To promote the green housing (GH) diffusion, the paper analyzes the customers’ willingness to pay (WTP) for GH. Especially, it divides them into clusters by two-step cluster to understand the heterogeneity in WTP. Moreover, instead of concentrating on the whole GH, it calculates the WTP for different attributes of GH by discrete choice model. 313 respondents are involved and divided into three clusters. And then, their heterogeneous WTP for attributes are calculated. It finds that: (i) The customers could be classified according to their socio-demographic and knowledge of GH, whereas the environmental concern could not be used to divide them; (ii) In general, the most attractive attributes are accessibility within 400 m to the service facilities and the comfortable indoor air quality, which could earn extra 381.63 and 375.5 RMB/m2 respectively; (iii) Recently, people in the upper-middle class are the target customers for GH, since they are attracted by most of the green-related attributes and have the largest WTP(1233.60 RMB/m2). They most want to pay for indoor air quality and higher green space ratio. People in the middle class are the potential customers for GH, while the lower-middle class does not prefer to GH. Accordingly, it further proposes suggestions for developers and government in terms of which cluster is the target group and what attributes are the most important to different customers.

Firms’ timing of production with heterogeneous consumers

AbstractI revisit endogenous timing in a quantity‐setting duopoly game. In the basic model, I show that given strong heterogeneity in consumers’ willingness to pay (WTP) and a moderately small consumer segment with low WTP, sequential moving outcomes can appear in equilibrium with the follower enjoying second‐mover advantage. Owing to consumer heterogeneity in WTP, there is a local property that a firm's aggressive behaviour may lead to a competitor responding more aggressively. Hence, the sequential moves can restrict firms’ total outputs to avoid a price collapse, and result in firms’ strategic choices that Pareto dominate those under the simultaneous move. I further generalize my results and show that although firms compete in quantity, under some conditions of the demand function, features of strategic complements can appear.

Exploring heterogeneity in willingness to pay for the attributes of higher education institutions

We provide an in-depth analysis of the extent and nature of heterogeneity in willingness-to-pay (WTP) for the attributes of higher education institutions (HEIs). Using data from Ireland, mixed logit and generalized multinomial logit models are used to examine heterogeneity in WTP by region, academic ability, and socio-economic status. The analysis shows that regional variation in WTP for the attributes of HEIs is substantial, which suggests that preferences may be shaped by the characteristics of the region in which a student lives. Heterogeneity in WTP is also found based on a student’s academic ability, with higher-ability students willing to pay considerably more for a higher-quality institution compared to lower-ability students. We also find that students in the highest socio-economic group are willing to pay more for all attributes.

Impact of environmental and social attitudes, and family concerns on willingness to pay for improved air quality: a contingent valuation application in Mexico City

By means of a single-bounded, referendum format contingent valuation, this paper estimates willingness to pay (WTP) for improved air quality among residents of Mexico City Metropolitan Area (MCMA). Findings from this paper illustrate heterogeneity in WTP associated with environmental and social attitudes, and family concerns. For instance, WTP is higher than average if respondents state a very high priority to air pollution but smaller than average if respondent’s household contains more adults than the sample median. This contingent valuation exercise provides elements to carry out cost–benefit analysis of environmental policies both recently implemented and currently under discussion in the MCMA context. For instance, a cost–benefit analysis using estimates from this paper suggests benefits from improved air quality surpass the costs of investing in hybrid buses. Usefulness of this study is underscored by pointing out recent evidence suggesting that (1) air pollution in MCMA has larger health impacts than in similar cities located in developed countries, and (2) policies tackling air pollution in MCMA have had no impact on pollution levels.

Consumers' willingness to pay for nutritional claims fighting the obesity epidemic: the case of reduced-fat and low salt cheese in Spain

ObjectivesThe aim of this study was to investigate consumers' willingness to pay (WTP) for cheeses bearing reduced-fat and low salt claims in Spain. Study designAn experiment with 219 cheese consumers was conducted in the period March–May 2015. We used different versions of cheese bearing reduced-fat and low salt claims. MethodsA choice experiment was used to estimate WTP for reduced-fat and/or low salt cheeses. Participants faced eight choice sets, each consisting of two packages of cheese with different combinations of two claims. Individuals chose one of the two packages of cheese in each choice set, or decided not to choose either. Moreover, to consider possible heterogeneity in WTP across consumers, a random parameters logit model (RPL), a Chi-squared test, and analysis of variance tests were used. ResultsSpanish cheese consumers were willing to pay a positive premium for packages of cheese with reduced-fat claims (€0.538/100 g), and for cheese with reduced-fat and low salt claims (€1.15/100 g). Conversely, consumers valued low-salt content claims negatively. They preferred to pay €0.38/100 g for a conventional cheese rather than one low in salt content. As there was heterogeneity in consumers' WTP, two different consumer segments were identified. Segment 1 consisted of normal weight and younger consumers with higher incomes and levels of education, who valued low salt cheese more negatively than those individuals in Segment 2, predominantly comprising overweight and older consumers with low income and educational level. This means that individuals in Segment 1 would pay more for conventional cheese (€1/100 g) than those in Segment 2 (€0.50/100 g). However, no difference between the two segments was found in WTP for reduced-fat cheese. ConclusionsThe findings suggest that consumers are willing to pay a price premium for a package of cheese with a reduced-fat claim or cheese with reduced-fat and low salt claims appearing together; however, they are not willing to pay for a package of cheese with only a low salt claim. In comparison with overweight people, normal weight consumers would prefer to pay more for conventional cheese than low salt cheese. Finally, the results of this study contribute to insights in the promotion of healthier food choices among consumers. In this regard, outreach activities promoted by food companies could drive consumers to increase their knowledge of the benefits of eating reduced-fat and low salt food products in relation to their health status.

TAXPAYER WILLINGNESS TO PAY FOR HEALTH INSURANCE REFORM: A CONTINGENT VALUATION ANALYSIS

A key criterion for evaluating policies to expand health insurance coverage is weighing the costs of such policies against the willingness of the public to pay for coverage expansions. We use new panel survey data from New York State to estimate residents' willingness to pay (WTP) to expand public insurance coverage. Using a nonparametric double‐bounded contingent valuation (CV) approach, we specifically ask residents about their WTP to reduce the rate of uninsurance in the state. Our results imply an aggregate lower‐bound WTP of over $2,800 per year to cover one person. We also analyze heterogeneity in WTP by sub‐group and changes in individual WTP over time between 2008 and 2010. We find that a large majority of residents are willing to pay additional taxes to reduce the number of uninsured in the state, and that average WTP remained remarkably stable despite the economic downturn and the politically polarized discussions surrounding the Affordable Care Act. Decomposing the changes in individual WTP, we find that economic factors related to the recession, including changes in income and employment status, cannot explain changes in individual WTP, whereas individual changes in political opinions about health insurance reform between 2008 and 2010 are strongly correlated with changes in WTP. (JEL H20, H42, H51, H75, I13)

Estimating the Value of Risk Reduction for Pedestrians in the Road Environment: An Exploratory Analysis

In recent years there has been a re-focus on the valuation of a statistical life from the ex post or human capital method to an ex ante willingness to pay (WTP) approach. This is in part a recognition that we need to focus on establishing the amount, ex ante, that individuals are willing to pay to reduce the risk of exposure to circumstances that might lead to death or degree of injury in the road environment. This study sets out a framework in which to identify the degree of preference heterogeneity in WTP of pedestrians to avoid being killed or injured. A stated choice experiment approach is developed. The empirical setting is a choice of walking route for a particular trip that a sample of pedestrians periodically undertakes in Australia. Mixed logit models are estimated to obtain the marginal (dis)utilities associated with each influence on the choice amongst the attribute packages offered in the stated choice scenarios. These conditional estimates are used to obtain the WTP distributions for fatality and classes of injury avoidance, which are then aggregated to obtain estimates for pedestrians of the value of risk reduction (VRR).

Willingness to Pay for a Quality-Adjusted Life-Year: The Individual Perspective

Objective The aim of this study was to elicit the individual willingness to pay (WTP) for a quality-adjusted life-year (QALY). Methods In a Web-based questionnaire containing contingent valuation exercises, respondents valued health changes in five scenarios. In each scenario, the respondents first valued two health states on a visual analog scale (VAS) and expressed their WTP for avoiding a decline in health from the better health state to the worse, using a payment scale followed by a bounded open contingent valuation question. Analysis WTP per QALY was calculated for QALY gains calculated using VAS valuations, as well as the Dutch EQ-5D tariffs, the two steps in the WTP estimations and each scenario. Heterogeneity in WTP per QALY ratios was examined from the perspective of: 1) household income; and 2) the level of certainty in WTP indicated by respondents. Theoretical validity was analyzed using clustered multivariate regressions. Results A total of 1091 respondents, representative of the Dutch population, participated in the survey. Mean WTP per QALY was €12,900 based on VAS valuations, and €24,500 based on the Dutch EuroQoL tariffs. WTP per QALY was strongly associated with income, varying from €5000 in the lowest to €75,400 in the highest income group. Respondents indicating higher certainty exhibited marginally higher WTP. Regression analyses confirmed expected relations between WTP per QALY, income, and other personal characteristics. Conclusion Individual WTP per QALY values elicited in this study are similar to those found in comparable studies. The use of individual valuations in social decision-making deserves attention, however.