Payment Vehicle Research Articles

Accessing the economic value of night view of bridge using contingent valuation method: the case of South Korea’s Han-River bridge

Purpose – The purpose of this paper is to estimate an individual’s probability of preservation of the night view of Han-River bridge tax using the contingent valuation method (CVM) and to present the effects of 4Es on experience economy theory. Design/methodology/approach – The on-site survey was conducted in the 11 district Han-River parks: Gwangnaru, Jamsil, Ttukseom, Jamwon, Banpo, Yeechon, Yeouido, Mangwon, Nanji, Ganseo and Yanghwa district, including 24 bridges such as Banpo, Olympic bridge during 8-9 pm around the lighting and 9-10 pm peak time of lighting. Findings – Truncated mean willingness-to-pay indicates that the economic value of the night view of Han-River bridge is 49,575 won (about USA $50) per household, which implies the significance of the preservation value of the night view. Research limitations/implications – This study sets a hypothetical market, and there are limitations on hypothetical bias of the dichotomous choice CVM. For the future study, a survey with a specific real payment vehicle in an attempt to reduce hypothetical bias can be a tool for the prevention of the overestimation. Practical implications – Through the study, Seoul city has to invest aggressively on the night view landscape business of Han-River bridge, which can become a landmark and has lots of attraction for tourists. As this study’s core aim was to justify the economic value of the night view of the Han-River bridges, the estimated amount strongly supports the lighting business of the Han-River bridge. Originality/value – The results of this research may help policy-makers of Han-River to establish practical decisions as to whether improving and preserving the Han-River’s night view lighting business are worth the value.

Capabilities as justice: Analysing the acceptability of payments for ecosystem services (PES) through ‘social multi-criteria evaluation’

‘Payments for ecosystem services’ (PES) is rapidly becoming a popular governance intervention within natural resource management to align land-use stewardship to conserve critical ecosystem services while simultaneously improving human well-being through the provision of incentives. This paper introduces two novel components for refining the legitimacy of PES in water resource management. Firstly, we broaden consideration of human well-being in PES beyond income effects by considering justice as the freedom or capability to ‘do and be’ whatever is desired. Secondly, this paper applies social multi-criteria evaluation as a decision-support framework to determine the acceptability and payment vehicle of PES within a set of alternative policy considerations for a complex ecosystem management decision. Through both technical and social evaluations of different management options against a set of criteria, we highlight the legitimacy that different PES designs may have for improving water quality and capabilities for well-being.

Discrete Choice Experiments in Developing Countries: Willingness to Pay Versus Willingness to Work

A concern when conducting stated preference valuation studies in rural developing or very low income contexts is the use of monetary willingness to pay (WTP) estimates. In circumstances where cash incomes are extremely low, a significant proportion of the population are not engaged in waged labour and the exchange of goods or services is augmented through barter or work exchange, the role of money is likely to be different from that within an urban developed setting. As such, ability to pay using money may be impaired and downwardly biased when compared with other mediums of exchange. In recognition of this several studies have used hypothetical labour contributions as payment vehicles and a common finding is that households are more often willing to contribute labour than they are money. In this paper we present the results of a split sample DCE using money and labour contributions as payment vehicles for improved drinking water quality in Kandal Province, Cambodia. We find little differences between the payment vehicles in terms of attribute non-attendance, marginal utilities of attributes or derived welfare values. We argue that this provides support for the use of WTP in rural developing areas where there are functioning labour markets.

Willingness to pay towards a public good: how does a refund option affect stated values?

Mandatory taxes and/or voluntary contributions are commonly adopted as the payment vehicle when eliciting willingness to pay (WTP) in environmental valuation studies. While mandatory taxes may arouse negative feelings, voluntary contributions may lead to strategic behaviour (over bidding) or free riding (under bidding). In this paper, we explore an alternative payment vehicle which avoids the draconian undertones associated with taxes and may be more incentive compatible than a voluntary contribution – a tax that incorporates a refund option. The template for such a payment vehicle is the value added tax charged to tourists in Ireland, but which can be reclaimed on exiting the country. In the context of raising public funds to support the conservation of rural countryside landscape, a comparison is made between the elicited WTP via a mandatory tax and that elicited via the alternative payment method incorporating a refund option. While we observe similar participation rates between the two payment methods, the refund option reveals a higher stated WTP.

The role of the payment vehicle in non-market valuations of a health care service: willingness-to-pay for an ambulance helicopter service.

This study analyses the role of the payment vehicle when conducting non-market valuations of health care services using stated preference methods. Based on a contingent valuation study conducted in Denmark encompassing more than 3400 respondents three important conclusions are drawn. Firstly, it is found that the valuation of a publicly financed ambulance helicopter service is higher than for an identical privately financed service. Secondly, the results suggest that the public premium is likely to be partly driven by altruistic preferences, and that some citizens value access to this type of service for all. An important driver is also perceptions of quality of services across the private and public sector. Finally, it is shown that exclusion of protest bidders is problematic and may bias welfare estimates. The take home message is that it is difficult to isolate the value of a good per se, and that analysts should take care in applying the payment vehicle that is likely to be applied in real life when valuing non-market goods. There has been little awareness of the importance of choice of payment vehicle in the literature to date.

Valuing access to biological collections with contingent valuation and cost–benefit analysis

Biological collections may be underutilised because of transaction costs incurred in their use. One way to reduce transaction costs and foster greater utilisation of biological collections that could benefit society is through the creation of a virtual central database of biological collections, available online. The objective of this paper is to estimate the benefits of this policy change using a dichotomous choice contingent valuation survey of the primary users of biological collections. Marginal willingness to pay (WTP) for access to a new central database linking collections around Australia was investigated through an annual user fee payment vehicle. The mean WTP of direct users of the proposed program was Australian dollar (A$) 149 per annum (95% confidence interval of $102–$348). We conducted a cost–benefit analysis of the proposal, showing that the aggregate benefits are likely to outweigh the total costs of setting up and maintaining the database in the longer term. These findings are useful for resource allocation decisions regarding biological collections.

Can We Stabilize the Price of a Cryptocurrency?: Understanding the Design of Bitcoin and Its Potential to Compete with Central Bank Money

Although Bitcoin was designed as a payment vehicle and as a store of value, it seems unlikely that currencies provided by central banks are at risk of being replaced, primarily because of the market price instability of Bitcoin. We diagnose the instability as being a symptom of the lack of flexibility in the Bitcoin supply schedule - a predetermined algorithm in which the proof of work is the major driving force. This paper explores the problem of instability from the viewpoint of economics, and suggests a new monetary policy for stabilizing the values of Bitcoin and other cryptocurrencies.

Willingness to pay and willingness to work for improvements of municipal and community‐managed water services

AbstractThis study investigates household preferences, in labor time and monetary terms, for improved water services in Guatemala using sequential contingent valuation questions. The household survey was implemented in areas served by municipal and community‐managed systems, which allows for comparing household preferences under those governance approaches. Results show that respondents with municipal services are willing to pay a substantial increase (more than 200%) in their water bills for reliable supplies of safe drinking water. They are also willing to work approximately 19 h per month for such improved services when labor hours are proposed as the payment vehicle. In contrast, households with community‐managed services are not willing to pay or work for service improvements, even though they report to be quite dissatisfied with current services. Policy implications are discussed.

Patient Preferences for Treatment of Low Back Pain—A Discrete Choice Experiment

BackgroundBack pain imposes a substantial economic and social burden, and treatment decisions are distorted by conflicting evidence. Thus, it is important to include patient preferences in decision making and policy making. ObjectiveTo contribute to the understanding of patient preferences in relation to the choice of treatment for low back pain. MethodsA discrete choice experiment was conducted with consecutive patients referred to a regional spine center. The respondents (n = 348) were invited to respond to a choice of two hypothetical treatment options and an opt-out option. The treatment attributes included the treatment modality, the risk of relapse, the reduction in pain, and the expected increase in the ability to perform activities of daily living. In addition, the wait time to achieve the treatment effect was used as a payment vehicle. Mixed logit models were created to perform analysis. Subgroup analysis, dividing respondents into sociodemographic and disease-related categories, further explored the willingness to wait. ResultsRespondents assigned positive utilities to positive treatment outcomes and disutility to higher risks and longer waits for effects of treatment and to surgical interventions. The model captured significant heterogeneity within the sample for the outcomes of pain reduction and the ability to pursue activities of daily living and for the treatment modality. The subgroup analysis revealed differences in the willingness to wait, especially with regard to treatment modality, the level of pain experienced at the time of data collection, and the respondents’ preferences for surgery. ConclusionsThe majority of the respondents prefer nonsurgical interventions, but patients are willing to wait for more ideal outcomes and preferred interventions. The results show that health care professionals have a very important task in communicating clearly about the expected results of treatment and the basis of their treatment decisions, as patients' preferences are highly individual.

Payment vehicle as an instrument to elicit economic demand for conservation

In this study we applied collective/mandatory and individual/voluntary payment vehicles to elicit public claim for governmental investments of urban coastal nature reserves; to verify the efficiency of either payment formats to recall protest voters declared under the other and sensitivity of respondents to reveal willingness to pay-WTP for maintenance and conservation of reserves. Results showed higher WTP bids and valuation under collective and mandatory payment format and supplied evidence that in developing countries people nurture expectancy on governmental actions and funding to conserve natural landscapes. The difference between the non-use values estimated under the two payment vehicles was USD 3.5 millions. For the purpose of this study, this indicates the amount claimed by local people for governmental investment in the coastal urban nature reserves. Ecological knowledge on the reserves have a positive effect on non-use values, underlining the role of information to increase people understanding on benefits supplied by nature reserve and to enable them to declared the utility attributed to these areas in economic terms.

What do respondents bring to contingent valuation? A comparison of monetary and labour payment vehicles

In the contingent valuation method, both the goods being valued and the payment vehicles used to value them are mostly hypothetical. However, although numerous studies have examined the impact of experience with the good on the willingness to pay, less attention has been given to experience with the payment vehicles. This paper examines how experience with payment vehicles influence responses to a contingent valuation scenario on maintaining irrigation canals in a developing country. Specifically, the paper uses a split-sample survey to investigate the effects of experience with monetary and labour payment vehicles on the acceptance of a contingent valuation scenario, protest bids and mean willingness to pay. Using convergent validity tests, we found that the experience acquired from using both monetary and labour payment vehicles reduces the asymmetries in acceptance rates. These findings suggest that experience with payment vehicles reduces time/money response asymmetries in the contingent valuation method.

Willingness to pay for renewable electricity: A contingent valuation study in Beijing, China

In China, renewable/green electricity, which can provide significant environmental benefits in addition to meeting energy demand, has more non-use value than use-value for electricity consumers, because its users have no way to actually own this use-value. To assess the value of renewable electricity and obtain information on consumer preferences, this study estimated the willingness to pay (WTP) of Beijing residents for renewable electricity by employing the contingent valuation method (CVM) and identified the factors which affect their WTP. The survey randomly selected 700 participants, of which 571 questionnaires were valid. Half of respondents were found to have positive WTP for renewable electricity. The average WTP of Beijing residents for renewable electricity is estimated to be 2.7–3.3 US$ (18.5–22.5CNY) per month. The main factors affecting the WTP of the respondents included income, electricity consumption, bid and payment vehicle. Knowledge of and a positive attitude towards renewable energy also resulted in the relatively higher willingness of a respondent to pay for renewable electricity. The proportion of respondents replying “yes” to WTP questions using a mandatory payment vehicle was slightly higher than that for questions using a voluntary vehicle. Lastly, several policy implications of this study are presented.

DETERMINANTS OF STUDENTS' WILLINGNESS TO PAY FOR VIOLENT CRIME REDUCTION

We apply the contingent valuation method to estimate how much a specific group of society, which is relatively prone to falling victim to crime, is willing to pay to reduce the likelihood of being the victim of violent crime. Based on responses from 1122 students, we found that younger and female students revealed that they are more inclined to pay so as to avoid violent crime. Students' field of study, cautious behavior and a strong opinion about policies and payment vehicles with potential to reduce the risk of crime are key determinants of the willingness to pay.

Using the Stated Preference Technique for Eliciting Valuations: The Role of the Payment Vehicle

At the core of the stated preference method is choice of payment vehicle. Since payment vehicle is an intrinsic characteristic of a good, the choice of payment vehicle will naturally impact on the valuation of the good. Typical payment vehicles applied in the context of health are income tax levies, out-of-pocket payments at the point of consumption or private health insurance premiums. Where out-of-pocket payments will elicit use value only, private health insurance premiums will also disclose option value, i.e. the utility of knowing that one has access to a healthcare service should one need it. Income tax levies will disclose what in this paper is referred to as citizen's preferences, i.e. individual preferences that include use value, option value as well as (caring) externalities. This paper advocates that researchers design stated preference studies that encompass all relevant dimensions of value, and that serious thought is given to choice of payment vehicle. However, it is important to acknowledge that choice of payment vehicle has other potential implications for valuations. Payment vehicle and provider of services may be strongly linked in people's minds. If respondents implicitly associate a specific type of provider with a certain type of payment vehicle, it is important that any misperception is corrected by way of a precise description of the good being valued. Further, a pertinent issue is the extent to which respondents 'protest' to the stated preference question and how we should deal with these 'protesters'. No agreement currently exists about the procedure used to separate genuine zero values from protest values, nor about the treatment of protest responses in subsequent analyses. Beliefs are strongly associated with protesting, and exclusion of protest bids may therefore exclude individuals who have strong preferences for a payment vehicle. If it is acknowledged that payment vehicle is an intrinsic component of a good, exclusion of respondents who exhibit specific viewpoints may result in biased welfare estimates. Yet another issue is the presence of self-consciousness amongst respondents. If people derive utility from saying they are willing to pay for a public good (social desirability bias or warm glow), this potentially drives a wedge between people's stated value for a good in a survey and people's value for a good provided to them from the government. Tax payments are more binding than out-of-pocket payments. Payment towards public health programs via income tax may therefore generate lower consumer surplus than if the intervention was financed out-of-pocket with the option of opting out both in terms of participation as well as financially. Finally, only a few studies have looked at the impact of frequency of payments. The effect of temporal framing is clearly potentially important and at the same time an unavoidable component of the payment vehicle, yet it remains at present unexplored.

Discounting the Distant Future: An Experimental Investigation

We use a laboratory experiment to elicit discount rates over a 20-year time horizon using government savings bonds as a payment vehicle. When using a constant (exponential) discount rate function, we find an implied average discount rate of 4.9 %, which is much lower than has been found in previous experimental studies that used time horizons of days or months. However, we also find strong support for non-constant, declining discount rates for longer time horizons, with an extrapolated implied annual discount rate approaching 0.5 % in 100 years. There is heterogeneity in discount rates and risk preferences in that people with more optimistic beliefs about technological progress have higher discount rates. These findings contribute to the debate over the appropriate discount rate to use in comparing the long-term benefits of climate change mitigation to the more immediate costs.

Rural Households' Demand for Frankincense Forest Conservation in Tigray, Ethiopia: A Contingent Valuation Analysis

AbstractFrankincense from Boswellia papyrifera forest (BPF) is a traded commodity used in the pharmaceutical, food, cosmetic and chemical industries. Ethiopia is an important producer of frankincense, but the resource is under continuous degradation and requires conservation. We applied a contingent valuation to assess rural households' willingness to pay and willingness to contribute labor for BPF conservation. Next to the bid, willingness to pay is influenced most by income, education, and willingness to contribute labor by family labor and gender of the household head. A household is willing to pay at least $4·86 or contribute 7·17 labor days per year, which amounts to $6·64 at per capita daily income. This suggests that using per capita daily income rather than market wage rates could result in convergence in response asymmetry of labor and cash payment vehicles. The potential local demand for conservation of BPF could be mobilized effectively with complementary policy interventions aimed at sustainable use and poverty reduction. Copyright © 2013 John Wiley & Sons, Ltd.

Do Respondents Report Willingness-to-Pay on a per Person or per Group Basis? A High Mountain Recreation Example

Contingent valuation methodology (CVM) studies often use dichotomous choice willingness-to-pay (WTP) questions to measure the value that visitors place on recreation. This study assesses whether individuals respond to WTP questions on an individual or a group basis and whether reported WTP values are affected by changes in wording to address this issue explicitly. The authors' analysis reveals statistically significant differences in mean WTP when the payment vehicle is worded more generally, compared to specific language questioning respondents about increases in their share of the cost. Further, dividing the WTP from the standard CVM survey language by group size did not restore the equality of individual average WTP. These results indicate that payment vehicle language in recreation studies should go to great lengths to ask explicitly for either individual or group WTP, to ensure that accurate WTP estimates are obtained.

Application of choice experiments to quantify the existence value of an endemic moss: a case study in Chile

AbstractA choice experiment was applied to measure the existence value of an endemic moss. We assessed value separation, embedding or warm glow and ‘ethical’ motivations. We exemplify our application by valuing an inconspicuous moss endemic to Chile's sub-Antarctic region. The choice experiment was administered to a sample of local residents of Navarino Island (southern Chile). The design isolates the existence value by requiring respondents to make simultaneous tradeoffs between moss existence value, five other biodiversity-related values and income changes. Insensitivity to scope was addressed by using degrees of extinction risks. We predominantly use a willingness-to-accept design of the payment vehicle to avoid protest responses. A meaningful marginal value for the existence of an endemic species for Navarino island residents was documented. The design, based on varying degrees of extinction risk, avoided a strong effect of warm glow. No protest responses motivated by ethical concerns were encountered.

A choice experiment study for land-use scenarios in semi-arid watershed environments

Within the ecosystem services framework, this study explores local population preferences for different land-use management options in the Nacimiento watershed (south-eastern Spain). To this end, we analysed the benefits generated by the watershed through a choice experiment. We selected two ecological (river quality and protected area), three socio-economic (traditional agriculture, ecotourism facilities and wind farms) and one monetary (tax reallocation) attributes associated with various ecosystem services in the area, where changes in land-use are occurring. The data were first analysed using a multinomial logit model. Then, a mixed logit model was used to account for heterogeneity across respondent preferences. Our results indicated that the respondents would support a new management plan, focussing on traditional farming and river quality. Fostering traditional agriculture and ecotourism were also supported by those who consider the preservation of local identity to be important; however, greater priority should be given to integrating the protected area with the preservation of local identity and the priorities of the local population. Furthermore, future stated preference studies to explore the trade-offs among rural-area-management policies should consider using tax reallocation as payment vehicle. These findings may offer important guidelines for the design of future land-use management plans in semi-arid mountains.

Willingness to Pay for Watershed Conservation at Hulu Langat, Selangor

Watershed is the one of the many goods and services provided by tropical forests in Malaysia. Among the variety of watershed protection benefits, domestic water supply from watershed is crucial, particularly in Hulu Langat district. Hulu Langat watershed is one of the environment sensitive areas that need to be protected. This area supply domestic fresh water to the Hulu Langat communities. The essence of this study is to evaluate the economic benefit for conserving watersheds services to sustain domestic water supply at Hulu Langat, Selangor. This valuation is envisaged to yield the value of willingness to pay (WTP) of the communities for the conservation of the watershed. Besides, this study also intends to evaluate the communities‘ awareness towards watershed conservation. The contingent valuation method (CVM) was conducted to estimate communities‘ WTP for the conservation. The primary data obtained from questionnaire survey through personal interview. About 500 respondents have been interviewed in six sub districts that utilize water supply from Hulu Langat watershed area. In CVM, payment vehicle used was increment of monthly water bill of Hulu Langat communities for the proposed watershed conservation program. The questionnaire design was based on dichotomous choice format. The data analyses used was binary logit model to estimate the basic single bounded model and double bounded model. In this study, WTP relies on the socioeconomic variables which are bid amount, income, number of year attainment in education and residential area (urban or suburban) of the respondents. The results from single bounded model show that the communities are willing to pay RM10.13 per person monthly with mean WTP of 23.10 percent increment in monthly water bill per household. In double bounded dichotomous choice model, the results revealed that the mean WTP value is 19.25 percent increment in monthly water bill. Parallel to the WTP results, the communities also have awareness to protect the watershed for sustainable fresh water supply. Therefore, an increment in monthly water bill could be implemented in Hulu Langat district area to assist watershed conservation initiatives. Firm policies for conservation can be executed like reforestation, increase in regular patrol, monitoring activities in the forest and effective forest management to ensure reduction in illegal logging, forest fire and wildlife poaching.