Willingness To Accept Estimates Research Articles

It’s all relative: consistent marginal effects with willingness to pay and willingness to accept framing in experimental auctions

ABSTRACT When eliciting consumer preferences for controversial products – an increasing number of which exist due to increasing demographic diversity and political polarization – conventional assumptions that all individuals derive positive marginal utility from consumption are challenged. It is relatively easy to adjust hypothetical stated preference questionnaires to include negative willingness to pay (WTP), but few studies on controversial products investigate how individuals behave using incentive-compatible revealed preference techniques. Using a framed field experiment with 292 adult subjects, we fill this gap by comparing the differences and similarities between a set of results that arise from the Becker-DeGroot-Marschak (BDM) mechanism between WTP versus willingness to accept (WTA) elicitation methods. This study has two main findings. First, in economic experiments eliciting preferences for controversial products, neither the WTP nor the WTA method fully discovers the true valuation range across all participants. Second, despite framing effects that give rise to different bid distributions, relative revealed preferences for the examined products are consistent under various interventions, indicating that WTP and WTA estimates have consistent policy implications.

Herdsmen's willingness to accept compensation for grazing ban compliance: Empirical evidence from pastoral China

Payment for ecosystem services (PES) has gained popularity in balancing environmental degradation and economic development. However, many of its key features, particularly price differentiation, are often not considered during design and implementation. Taking China's grassland ecological compensation policy as an example, we empirically examine herders' willingness to accept (WTA) compensation for grazing ban compliance, based on a survey dataset of 352 herder households in the pastoral areas of the Gansu and Qinghai provinces in China. A double-bounded dichotomous choice contingent valuation design was adopted, with interval regression and bivariate probit models adjusted for potential bid anchoring utilized to obtain reliable WTA estimates. The results show that the mean WTA ranges between CNY 193 and CNY 274 per mu, which is significantly higher than the present universal compensation level. Herdsmen's WTA is significantly and positively associated with household size and having migrant worker family members, while it is negatively influenced by age, environmental perception , household income, and sandy soil. We suggest that the basic institution of China's grassland ecological compensation policy (GECP) should be reformed to allow price differentiation, bottom-up participation, and performance-dependent payments. • We examine herdsmen's willingness to accept (WTA) for grazing ban compliance. • A double-bounded dichotomous choice contingent valuation design is adopted. • Estimated WTA is substantially larger than the current compensation level. • WTA decreases with herdsmen's environmental perception. • Price differentiation and bottom-up participation should be allowed.

Population preferences for non-pharmaceutical interventions to control the SARS-CoV-2 pandemic: trade-offs among public health, individual rights, and economics

ProblemPolicymakers must decide on interventions to control the pandemic. These decisions are driven by weighing the risks and benefits of various non-pharmaceutical intervention alternatives. Due to the nature of the pandemic, these decisions are not based on sufficient evidence regarding the effects, nor are decision-makers informed about the willingness of populations to accept the economic and health risks associated with different policy options. This empirical study seeks to reduce uncertainty by measuring population preferences for non-pharmaceutical interventions.MethodsAn online-based discrete choice experiment (DCE) was conducted to elicit population preferences. Respondents were asked to choose between three pandemic scenarios with different interventions and impacts of the Corona pandemic. In addition, Best–worst scaling (BWS) was used to analyze the impact of the duration of individual interventions on people’s acceptance. The marginal rate of substitution was applied to estimate willingness-to-accept (WTA) for each intervention and effect by risk of infection.ResultsData from 3006 respondents were included in the analysis. The DCE showed, economic effect of non-pharmaceutical measures had a large impact on choice decisions for or against specific lockdown scenarios. Individual income decreases had the most impact. Excess mortality and individual risk of infection were also important factors influencing choice decisions. Curfews, contact restrictions, facility closures, personal data transmissions, and mandatory masking in public had a lesser impact. However, significant standard deviations in the random parameter logit model (RPL) indicated heterogeneities in the study population. The BWS results showed that short-term restrictions were more likely to be accepted than long-term restrictions. According to WTA estimates, people would be willing to accept a greater risk of infection to avoid loss of income.DiscussionThe results can be used to determine which consequences of pandemic measures would be more severe for the population. For example, the results show that citizens want to limit the decline in individual income during pandemic measures. Participation in preference studies can also inform citizens about potential tradeoffs that decision-makers face in current and future decisions during a pandemic. Knowledge of the population’s preferences will help inform decisions that consider people’s perspectives and expectations for the future.Survey results can inform decision-makers about the extent to which the population is willing to accept certain lockdown measures, such as curfews, contact restrictions, lockdowns, or mandatory masks.

Conservation easement landowners' willingness to accept for forest thinning and the impact of information

After being subject to several decades of degradation, the bottomland hardwood (BLH) forests within the Lower Mississippi Alluvial Valley have undergone landscape-scale restoration regimes through conservation easement programs, such as the Wetland Reserve Program (WRP). Reforested easements offer an opportunity for landowners' adoption of forest management practices to fulfill the program's long-term conservation goals. Using the contingent valuation approach, we examine easement landowners' willingness to accept (WTA) to thin their forest subject to an easement to enhance forest health and wildlife habitat quality, and we test the effect of providing information about the benefits of thinning on WTA estimates. Results from an interval regression model suggest that ownership characteristics like years of ownership, involvement in non-timber activities like hiking and walking, and management characteristics like having past intention to thin, significantly decreased WTA while being an original easement grantor and ownership objectives like legacy increased WTA. The mean monetary compensation required to induce thinning adoption is $11.41 per ton of pulpwood. There is some evidence that the information intervention influences the WTA estimates downward, representing a potential policy instrument to achieve thinning objectives in the conservation easements efficiently.

Security of supply and the energy transition: The households' perspective investigated through a discrete choice model with latent classes

A consumer-centric, market-based approach to the security of electricity supply has been recognized as increasingly important in the context of the energy transition. Nonetheless, there is no clear-cut evidence regarding the drivers of consumer preferences toward security and the perceived trade-offs between security and sustainability. Using stated preference data, we develop a discrete choice model with latent classes to assess the willingness-to-accept (WTA) of Swiss households for variations in the frequency and duration of blackouts, while accounting for the primary energy sources used for generation. Our WTA estimates range from slightly negative values up to ten times the current electricity prices, depending on the characteristics of both blackouts, and respondents. More specifically, we identify three latent classes showing different preferences toward blackout frequency and length, but also different sensitivities toward blackouts associated to nuclear or solar generation, as well as toward prospective changes in the generation mix. Energy illiteracy, concern about the economic impact of blackouts, and concern about nuclear generation are the main determinants of class membership probability.

Store brand vs. national brand prices: Willingness to pay ≠ willingness to accept

ABSTRACT Determining the appropriate price for store brands relative to national brands is important. When setting the price, consumers’ perceptions of price and quality need to be considered. Two past approaches employed by store brand researchers to reveal consumers’ value of store brands include asking either: (1) the price discount they would need to be offered to switch from a national brand to a store brand (a measure of “willingness-to-accept”); or (2) the price premium they would be willing to pay to switch from a store brand to a national brand (a measure of “willingness-to-pay”). Research in other domains reveals that willingness-to-accept (WTA) and willingness-to-pay (WTP) estimates can diverge. We formally tested whether WTA estimates differ from WTP estimates elicited from consumers with respect to store and national brand prices. As predicted, WTA price estimates exceeded those of WTP. This pattern held regardless of whether product-quality equivalence of store and national brands was explicitly provided to respondents or whether respondents were free to make their own assumptions of product quality. Implications for private label researchers and product brand managers are discussed.

Conservation contracts for supplying Farm Animal Genetic Resources (FAnGR) conservation services in Romania

This paper describes a choice experiment (CE) administered to explore farmer preferences for conservation agreements to conserve rare breeds among a sample of 174 respondents in Transylvania (Romania). The study site was chosen due to the prevalence of small-scale and extensive farm systems threatened by a changing policy environment that is increasing the scale and intensity of production units. Agreement attributes included length of conservation contract (5 or 10 years); scheme structure (community or individual managed conservation programme), and scheme support (application assistance or farm advisory support). A monetary attribute that reflects compensation for scheme participation allows the assessment of farmers’ willingness to accept (WTA) for different contracts. Results suggest 89% of respondents would be willing to farm with rare breeds; cattle and sheep being the most popular livestock option; 40% of farmers were reportedly farming with endangered breeds. However, only 8% were likely to qualify for funding support under current requirements. WTA estimates reveal minimum annual compensation values of €167 and €7 per year respectively, for bovine and ovine farmers to consider enrolling in a contract. These values are comparable to Romanian Rural Development Programme (RDP) support offered to farmers keeping rare breeds of €200 and €10 per year for bovine and ovine farmers respectively. Our estimates of scheme uptake, calculated with coefficient values derived from the CE, suggest rare breed conservation contracts are considered attractive by Romanian farmers. Analysis suggests meeting farmer preferences for non-monetary contractual factors will increase participation.

Estimates of willingness to accept compensation to manage pine stands for ecosystem services

Many ecosystem services are often overlooked in active management of private forests leading to their production below the levels preferred by the society. This study used the contingent valuation method (CVM) to estimate willingness to accept (WTA) compensation for managing a hypothetical tract of loblolly pine (Pinus taeda) for multiple ecosystem services. The CVM scenario involved four forest management alternatives representing increasing levels of forest management restrictions. A structural random effects probit model was constructed to quantify WTA compensation amounts. Mean WTA estimates ranged from $190.22 to $595.23 per hectare (ha) per year and increased with the intensity of forest management restrictions. Based on the WTA estimates, the total cost of increasing ecosystem production ranged from $0.88 to $4.76 billion per year. Increased budgets and private partnerships might be needed to implement forest management regimes facilitating multiple ecosystem services.

Assessing Consumer and Producer Preferences for Animal Welfare Using a Common Elicitation Format

AbstractWe assess pig farmers’ willingness‐to‐accept (WTA) higher farm animal welfare (FAW) standards and consumers’ willingness‐to‐pay (WTP) for thus enhanced standards. The analysis is based on discrete choice experiments with nearly identical choice sets for both farmers (N=140) and consumers (N=554). Based on preference estimates from a random parameter logit (RPL) model, supply and demand curves for high‐welfare pork in Germany are estimated and market equilibria are derived for alternative levels of FAW. We find that estimates of consumer WTP are significantly positive for all FAW attributes: consumers value more surface space per pig, more bedding and manipulable material, less surgical interventions and shorter transportation times. In contrast, our model revealed significant producer WTA estimates only for surface area per pig and the amount of bedding material on offer, but not for the other FAW attributes. Farmers who expect to continue farming and engage in direct marketing are more likely to adopt higher FAW standards. Male consumers and those who find price more important than brand, origin or taste are less likely to buy high‐welfare pork, as are consumers who never purchase organic meat products. Market simulations for high‐welfare pork indicate increasing divergence between demand and supply with rising FAW standards. We estimate a market share of 44.6% for pork produced in compliance with an entry‐level FAW programme with standards only slightly above the legal minimum. Programmes with more demanding standards are estimated to gain much smaller market shares.

E-commerce in agriculture – The case of crop protection product purchases in a discrete choice experiment

The internet is playing an increasing role in the development of rural areas. Farmers in particular, can benefit from new opportunities concerning farm management decisions. Hence, the goal of this study was to investigate German farmers’ willingness to accept (WTA) e-commerce. Primary data of 165 farmers was collected by conducting a discrete choice experiment about the purchase of crop protection products. WTA estimates show that farmers are willing to switch to an online merchant if they are offered a significantly lower price. However, word-of-mouth-reputation and consultation offered via traditional media do not influence farmers’ WTA for an online merchant. In contrast, delivery time significantly affects farmers’ WTA for inputs purchased online. We also show that farmers’ risk attitudes, prior online shopping experiences, and education are influential factors for the WTA for an online merchant. Surprisingly, age and farm size do not impact farmers’ WTA. Since e-commerce has not been widely established in agriculture yet, these results are of great practical importance. The findings of this study demonstrate that online merchants of agricultural inputs should focus on trust, service quality and timely delivery. Furthermore, it might be useful to introduce farmers to e-commerce during their education.

Unraveling determinants of inferred and stated attribute nonattendance: Effects on farmers’ willingness to accept to join agri‐environmental schemes

AbstractAttribute nonattendance (ANA) has received very little attention in the context of willingness to accept (WTA), although an increasing number of studies analyze the preferences of ecosystem service providers toward incentive‐based schemes. We add to the understanding of ANA behavior by analyzing stated and inferred ANA in a choice experiment investigating farmers’ WTA for participating in agri‐environmental schemes (AES) in southern Spain. We use mixed logit models, following Hess and Hensher for the inferred ANA approach. Evidence is found of ANA behavior for both stated and inferred approaches, with models accounting for ANA clearly outperforming those that do not account for it; however, we produce no conclusive results as to which ANA approach is best. WTA estimates are only moderately affected, which to some extent is consistent with the low level of non‐attendance found for the monetary attribute. Stated and inferred approaches show very similar WTA estimates. Additionally, we investigate sources of observed heterogeneity related to ANA behavior by using a sequence of bivariate probit models for each attribute. Overall, our results hint at a positive relationship between ease of scheme adoption and nonattendance to attributes. However, further research is still needed in this field.

The effect of giving respondents time to think in a choice experiment: a conditional cash transfer programme in South Africa

AbstractWe conducted a choice experiment (CE) to estimate willingness to accept (WTA) values for a planned conditional cash transfer (CCT) programme designed to increase toilet use in South Africa. The payment is made conditional on using a toilet and bringing urine to a central collection point. In a split-sample approach, a segment of respondents were given time to think (TTT) (24 hours) about their responses, while the remaining respondents had to answer immediately. We found significant differences in the choice behaviour between the subsamples. To validate the stated preferences with actual behaviour, a CCT programme was implemented afterwards. The stated WTA estimates were far below those revealed by actual behaviour for both subsamples. Contrary to our expectations, the TTT group had underestimated their actual WTA values by an even larger margin. The preferences for various attributes were nevertheless useful in informing the design of the real intervention.

Health Benefits and Industrial Air Pollution: A Comparison between People’s Willingness to Accept and the Opportunity Cost of Health Risk

The disparity between willingness to accept (WTA) health risks and actual health risks arising from environmental pollution has not been demonstrated well in the literature. This study provides evidence on WTA for bearing existing health risks arising from environmental pollution caused by the Limestone Industry in Sri Lanka. It compares mean WTA with monthly average health expenditure as well as the opportunity cost of health risk. The study finds that the average monthly health expenditure, averting expenditure and lost earning per person were Rs. 168, Rs. 85 and Rs. 262 respectively. Accordingly, opportunity cost of the health damage was Rs. 515 while mean willingness to accept was Rs. 792 per person. Results clearly show that mean WTA estimates tends to overestimate the true cost. The study also summarizes reasons for the disparity and then discusses some of the key implications of the analysis. Sri Lankan Journal of Agricultural Economics Vol.(14-15)No. 1 (2012-2013) pp. 43-58

Would you test for 5000 Shillings? HIV risk and willingness to accept HIV testing in Tanzania.

ObjectivesDespite substantial public health efforts to increase HIV testing, testing rates have plateaued in many countries and rates of repeat testing for those with ongoing risk are low. To inform policies aimed at increasing uptake of HIV testing, we identified characteristics associated with individuals’ willingness-to-accept (WTA) an HIV test in a general population sample and among two high-risk populations in Moshi, Tanzania.MethodsIn total, 721 individuals, including randomly selected community members (N = 402), female barworkers (N = 135), and male Kilimanjaro mountain porters (N = 184), were asked in a double-bounded contingent valuation format if they would test for HIV in exchange for 2000, 5000 or 10,000 Shillings (approximately $1.30, $3.20, and $6.40, respectively). The study was conducted between September 2012 and February 2013.ResultsMore than one quarter of participants (196; 27 %) stated they would be willing to test for Tanzania Shilling (TSH) 2000, whereas one in seven (98; 13.6 %) required more than TSH 10,000. The average WTA estimate was TSH 4564 (95 % Confidence Interval: TSH 4201 to 4927). Significant variation in WTA estimates by gender, HIV risk factors and other characteristics plausibly reflects variation in individuals’ valuations of benefits of and barriers to testing. WTA estimates were higher among males than females. Among males, WTA was nearly one-third lower for those who reported symptoms of HIV than those who did not. Among females, WTA estimates varied with respondents’ education, own and partners’ HIV testing history, and lifetime reports of transactional sex. For both genders, the most significant association was observed with respondents’ perception of the accuracy of the HIV test; those believing HIV tests to be completely accurate were willing to test for approximately one third less than their counterparts. The mean WTA estimates identified in this study suggest that within the study population, incentivized universal HIV testing could potentially identify undiagnosed HIV infections at an incentive cost of $150 per prevalent infection and $1400 per incident infection, with corresponding costs per quality adjusted life year (QALY) gained of $70 for prevalent and $620 for incident HIV infections.ConclusionsThe results support the value of information about the accuracy of HIV testing, and suggest that relatively modest amounts of money may be sufficient to incentivize at-risk populations to test.

Public demand for remediating a local ecosystem: comparing WTP and WTA at Hongze Lake, China

The contingent valuation method was applied to examine public demand for ecosystem improvement at Hongze Lake by asking 520 respondents living around the lake about their willingness to pay (WTP) for a hypothetical improvement in the water quality of Hongze Lake and their willingness to accept (WTA) certain compensation if the hypothetical improvements were not carried out. The mean values of WTP and WTA were ¥283.08 ($1981.56) and ¥1385.28 ($9696.96), respectively, for the same ecological restoration program, which suggests that WTA was almost 5 times greater than WTP. We found this great disparity between WTP and WTA largely driven by 2 factors: income and education. These factors could be explained by the “income effect” on WTP and the negative influence of education on WTA, respectively. Econometric results indicate that WTP increased along with increased income (Coefficient, 19.09; p < 0.001), while WTA was inversely related to education level (Coefficient, −18.30; p < 0.001). Meanwhile, the ratio of WTA and WTP increased as income (Coefficient, −0.78; p < 0.001) and education level (Coefficient, −0.28; p < 0.001) decreased. These results suggest important potential discrepancies between the valuation estimates of WTA and WTP. Because we found the discrepancies to be driven by education and income, there are important equity concerns that the government should consider when relying on WTP versus WTA estimates to inform policy. An effective measurement mechanism should also engage differences in the environmental protection sensitivities that various groups possess. The Chinese government should play an important role in improvement of public environmental awareness and environmental protection policy. [Supplementary materials are available for this article. Go to the publisher's online edition of Lake and Reservoir Management for the following free supplemental resource: full version of contingent valuation questionnaire.]

Do entreaties reduce the WTA–WTP disparity when valuing public goods?

In this work we investigate the effects of entreaties to reduce the disparity between willingness to pay (WTP) and willingness to accept (WTA) estimates in the valuation of a public program. We find that entreaties are very effective on reducing the hypothetical bias inherent to the WTA estimates, as well as the gap between both WTP and WTA welfare estimates. The success of such entreaties warrants future research in this area.

ESTIMATING THE LOCAL COST OF PROTECTING KOSHI TAPPU WILDLIFE RESERVE, NEPAL: A CONTINGENT VALUATION APPROACH

We estimate the compensation required by the local communities to forego access to the natural resources within the Koshi Tappu Wildlife Reserve (KTWR), Nepal using the contingent valuation method (CVM). In addition to contributing a CVM application from a seldom studied location to the literature, this case illustrates the sensitivity of WTA estimates to the analytical technique adopted. We analyze households’ willingness to accept (WTA) compensation using Tobit and double-hurdle regression models that account for the censored distribution of WTA and nested yes/no decision implicit in the WTA responses. The average WTA of a household residing in the vicinity of KTWR is estimated to be US $238, which amounts to nearly $ 1.64 million for the neighboring region. The results provide a basis to address local people’s concerns in the process of sustainable management of natural resources and wetland ecosystems in KTWR, Nepal.

Comments on the 2001 Draft Report to Congress on the Costs and Benefits of Federal Regulations

OMB-overseen regulatory cost-benefit analysis (CBA) requirements distort the regulatory decision-making process in ways that cause serious harm to public health, safety and the environment. The methodologies used in these analyses are fatally flawed. In general, no real effort is made to measure changes in consumer and producer surplus; instead, industry estimates of compliance costs are compared with poorly-monetized and incomplete estimates of a portion of expected short-term regulatory benefits, with long-run benefits disappearing due to overzealous discounting. For example, society’s willingness-to-accept (WTA) environmental and other regulated risks is generally considered by welfare economists to be the best measure of the value of risk regulation. By relying on willingness-to pay (WTP) estimates — which are generally a small fraction of WTA estimates — regulatory CBAs systematically understate the value of environmental, health and safety goods. In addition, although experts disagree over whether all goods properly may be discounted, to the extent that an academic consensus with respect to discounting intergenerational, nonmarket goods can be said to exist, the consensus is to use a much lower rate than seven percent. Use of the seven-percent discount rate significantly undervalues all benefits that are expected to accrue in the future, and thus seriously distorts evaluation of the benefits of public protection. In application, a seven-percent discount rate means that saving a single life this year will be considered more valuable to society than saving ten lives thirty-five years from now. This simply does not reflect our actual preferences as a nation that cares about its children. Finally, regulatory CBA gives equal weight to monetized goods no matter to whom they accrue. This makes it impossible for the promotion of justice, fairness, and equity — goods that are often among the intended goals of the statutes agencies operationalize — to receive any weight in the analysis whatsoever. Proposals to add distributional weights to CBA (or to otherwise adjust CBA practice to accommodate agency efforts to uphold principles) have been repeatedly rejected.