Willingness To Pay Estimates Research Articles

A convergent validity test within the payment card format using simulation techniques

ABSTRACTA convergent validity test is performed between two groups of versions of the payment card format. The first group, the classic payment card (CPC), asks respondents to report their willingness to pay (WTP) as a point from a list of amounts, and then treats each WTP response as an interval. The second group generates WTP data that may contain both single point and interval values. It includes the two-way-payment ladder (TWPL) (respondents have to tick amounts they would definitely pay and cross amounts they would definitely not pay), and point-interval payment card (PIPC) (respondents have to tick their WTP as either a point or an interval). The test is conducted using data from one TWPL study and two PIPC studies. For each study, we use WTP values stated to simulate 200 CPC WTP datasets, which allows controlling for any behavioral biases likely to confound the outcome of the test. The results challenge the conventional way of eliciting WTP under the CPC and the typical way of treating WTP data from this PC version. Although convergent validity holds between the TWPL/PIPC and CPC, parameter and mean WTP estimates from the TWPL and PIPC are more stable as PC intervals widths increase.

Estimating willingness-to-pay for health care: A discrete choice experiment accounting for non-attendance to the cost attribute.

The literature suggests that discrete choice experiments (DCEs) are a preferable method for estimating willingness-to-pay (WTP) values, as they may avoid some biases often observed in contingent valuation surveys, such as protest and strategic behaviour. However, the choice studies have demonstrated that attribute non-attendance may be a serious issue that leads to biased WTP estimates. A DCE was used to estimate patients' WTP for dental care at the dental school clinic. The endogenous attribute attendance (EAA) model was used to estimate WTP for dental care attributes, while accounting for non-attendance to the cost attribute. The EAA model revealed that almost every second respondent had ignored the cost attribute when making choices, indicating that patients were very sensitive to other characteristics of dental care. Dental care providers should pay particular attention to providing a detailed explanation of treatment to their patients, as this was the most valued attribute of dental care. The welfare estimates from the EAA model, which accounted for non-attendance to the cost attribute, were more than two times lower than welfare estimates from a traditional multinomial logit model and mixed logit model estimated in WTP space. The findings raise concerns for derived WTP estimates in DCE studies that did not consider non-attendance to the cost attribute during the estimation process. Non-attendance to the cost attribute overestimates WTP values, even if being motivated by the true preferences of respondents.

Preterm birth and economic benefits of reduced maternal exposure to fine particulate matter

Preterm birth (PTB) is a predictor of infant mortality and later-life morbidity. Despite recent declines, PTB rates remain high in the United States. Growing research suggests a possible relationship between a mother's exposure to common air pollutants, including fine particulate matter (PM2.5), and PTB of her baby. Many policy actions to reduce exposure to common air pollutants require benefit-cost analysis (BCA), and it's possible that PTB will need to be included in BCA in the future. However, an estimate of the willingness to pay (WTP) to avoid PTB risk is not available, and a comprehensive alternative valuation of the health benefits of reducing pollutant-related PTB currently does not exist. This paper demonstrates an approach to assess potential economic benefits of reducing PTB resulting from environmental exposures when an estimate of WTP to avoid PTB risk is unavailable. We utilized a recent meta-analysis, county-level air quality data and county-level PTB prevalence data to estimate the potential health and economic benefits of a reduction in air pollution-related PTB, with PM2.5 as our case study pollutant. Using this method, a simulated nationwide 10% decrease from 2008 PM2.5 levels resulted in an estimated reduction of 5016 PTBs and benefits of at least $339 million, potentially reaching over one billion dollars when considering later-life effects of PTB.

Effect of Environmental and Altruistic Attitudes on Willingness-to-Pay for Organic and Fair Trade Coffee in Flanders

Sustainability labels, on food products, provide information to consumers that the product has been produced in an ethical and environmentally friendly way. We explore the knowledge and purchasing behaviour of the organic label and fair trade label. Secondly, we investigate the willingness-to-pay (WTP) for food products bearing organic and fair trade labels. Thirdly, we examine the effects of demographic characteristics and environmental and altruistic attitudes on WTP for both organic and fair trade labels. Lastly, we evaluate the correlation in WTP for organic and fair trade labels. We draw our conclusions by analyzing a stated choice experiment on consumers’ coffee buying behaviour in Flanders, Belgium. Our results suggest that knowledge of the fair trade label is higher than that of the organic label. The importance of the organic and fair trade labels on coffee purchase decisions, as well as their WTP estimates, were similar. We found a high correlation in WTP for both labels. Our results indicate significant effects of environmental and altruistic attitudes on WTP for both organic and fair trade labels as they apply to coffee.

The acceptance and willingness to pay (WTP) for hypothetical dengue vaccine in Penang, Malaysia: a contingent valuation study

BackgroundMalaysia has been experiencing an escalation in dengue cases since the past 5 years. As the dengue vaccine pipeline continues to develop steadily with strong public interests, this study had been sought to elicit the acceptance and the willingness to pay (WTP) for hypothetical dengue vaccine in Malaysia.MethodsThis study adopted the cross-sectional, contingent valuation study that involved 400 respondents in Penang, Malaysia. The double-bounded dichotomous choice via bidding game approach was employed to elicit the WTP value for two hypothetical 3-doses dengue vaccines (Vaccines A and B with 5- and 10-years’ protection, respectively against dengue). A univariate logistic regression model was employed to assess the key determinants of vaccine acceptance, while the mean WTP value and its associated factors were measured by using the parametric two-part model (TPM).ResultsDengue vaccine appeared to be highly acceptable (88.4%) among the population in Penang, Malaysia. Respondents who were of Chinese ethnicity (OR 0.36, p = 0.017), with higher dengue knowledge score (OR 1.43, p = 0.016), and higher vaccination attitude score (OR 1.91, p < 0.001) were more likely to accept the vaccine. The first step logit estimation from TPM displayed that pensioners (OR 2.37, p = 0.036), respondents who were self-employed or working in the private sector (OR 1.21, p = 0.002), respondents with higher education level (OR 2.09–3.29, p < 0.05), and those who accepted the vaccine (OR 3.23, p = 0.001) were more likely to pay for the vaccine. The adjusted mean WTP value for the vaccine was MYR39.21 (USD9.45) per dose. Next, the second-stage regression from TPM revealed the key factors that significantly affected the WTP value, which were composed of age, gender, occupation, household income, dengue prevention practice, and protection duration of the vaccine. The pensioners and those with better dengue prevention practice were willing to pay more for the vaccines. Additionally, all the respondents elicited a higher WTP amount toward the vaccine with longer protection duration (Vaccine B).ConclusionStrong acceptance toward dengue vaccine reflects the high value of the vaccine in Malaysia. The WTP estimates offer quantification of the private benefit in reducing occurrences of the disease. Besides, the people’s preferences-based WTP value for the vaccine tends to complement scientific decision-making and prioritization in the management of dengue in the country.

Defensive Investment in Municipal Water Hardness Reduction

We produce estimates of household's willingness to pay (WTP) for reduction in water hardness using a defensive investment framework. Using total dissolved solids (TDS) data observed in municipal water supplies in combination with product-by-store level point-of-sale scanner data on consumable water softening product sales, we provide among the first revealed preference estimates of WTP for water hardness reduction and quality control. Using instrumental variable regressions, we find that household's marginal WTP increases as the observed TDS in municipal water increases. Aggregating these estimated WTP at county level, we show how total WTP varies geographically, after controlling for income and fixed effects. Our estimations provide evidence that households have a non-negligible WTP for water hardness reduction, which has important policy implications for optimal water hardness management by municipal water authorities, and those policies aimed to target salinity management within surface and subsurface water supplies.

Convergent validity of alternative dependent variable specifications for individual travel cost models

Applications of individual observation travel cost models have employed two alternative dependent variable specifications, (trips) and (person-trips), defined as (trips*groupsize). For 58 National Park Service data sets, willingness to pay (WTP) was estimated using both the trips and person-trips construction. Significant differences were found in pairwise comparisons of the alternative WTP estimates in 29 of 58 cases. For a subset of 31 data sets where statistically significant travel cost parameters could be estimated under both dependent variable specifications, 23 of 31 models showed statistically significant differences in WTP between the two models. In all 23 cases of a significant difference in WTP, the specification using person-trips as the dependent variable was greater than the cases using trips as the dependent variable. Additional analysis showed that lack of dispersion in the trips variable, as measured by the percent of visitors reporting taking only one trip to the site, was positively correlated with the differences in the WTP estimates.

Willingness to pay estimates informing agribusiness decision making: a cautionary tale

Multiple methods to improve reliability of results when using willingness-to-pay (WTP) to evaluate consumer preferences have been developed. This study compared methods of accounting for attribute non-attendance (ANA) in WTP for food product attributes. Both inferred and stated ANA were studied and estimates of WTP for pork chop and bacon attributes were compared. A larger number of significant differences were found between stated or inferred ANA corrected models than between corrected and uncorrected models. Significant correlations between inferred and stated ANA were not present and WTP estimates from correcting for inferred ANA (IANA) or stated ANA were statistically different from one another. Exploring WTP estimates across ANA corrected models is imperative for improving models to provide insight into consumer preferences. These insights can be used in making production decisions in order to meet consumer demands and inconsistent results can lead to conflicting business decisions.

Fine-tuning willingness-to-pay estimates in second price auctions for market goods

While the vast literature on induced-value second price auctions (SPAs) documents consistent overbidding behavior, this fact is conveniently ignored by some researchers when using SPAs to elicit willingness-to-pay (WTP) for market goods. This raises serious concerns regarding the reliability of the resulting WTP estimates. We propose a simple experimental design that not only tests the external validity of SPA bids in this domain, but also suggests a procedure to help enhance the accuracy of WTP estimates for market goods in SPAs. Following the SPA, participants were offered a randomly chosen price at which they could purchase any amount of the good in an onsite real secondary market. A comparison between the SPA bids and behavior in the secondary market was used to uncover inconsistent subjects, who were classified as either overbidders or underbidders. We find robust evidence that the dominance of overbidding in SPAs leads to an upward bias in the WTP estimates. While this can compromise market good valuations by inflating the perceived value of products, our simple design can be used to adjust the bids in a manner that more accurately resembles the individual’s true unobservable valuation for the market good.

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.

Public Assessment of Releasing a Captive Indo-Pacific Bottlenose Dolphin into the Wild in South Korea

A captive Indo-Pacific bottlenose dolphin named “Jedol” was released from a zoo into the wild, in Jeju Island Sea off South Korea, in July 2013 to improve his welfare. Since he was illegally captured off the coast of Juju Island in May 2009, he had been performing in dolphin shows at Seoul Zoo, which is owned and operated by the Seoul Metropolitan Government. The release demanded considerable public expenditure, of which the source was local taxes gathered from the residents of Seoul. This paper seeks to conduct an ex-post evaluation of the release, employing the contingent valuation (CV) technique. A total of 500 households living in Seoul in 2013 participated in the CV survey to report their willingness to pay (WTP) for the release. Fifty-two percent were willing to accept an increase in local taxes over the next five years to carry out the release. The mean household WTP estimate was obtained as KRW 4880 (USD 4.56) per annum. The present values of the total WTP and the cost of the release are KRW 79.82 billion (USD 74.53 million) and KRW 751 million (USD 701,000), respectively, in 2013. Interestingly, the former is much more than the latter. We can conclude that the release was desirable from the point of view of Seoul residents.

Do consumers value employee ownership? Evidence from an experimental auction

PurposeThe purpose of this paper is to evaluate how the public at large perceives employee ownership, and how public perceptions of employee ownership translate into consumer valuation of goods and/or services produced by employee-owned firms. To the extent that consumer interest regarding the governance and ownership structure of firms matters in their purchasing decision, an employee-owned certification label could be an instrument by firms to segment consumer demand, differentiate products and potentially realize a competitive advantage.Design/methodology/approachThree specific questions are evaluated using the fifth price, experimental Vickrey valuation auction. First, the author obtains estimates of willingness to pay (WTP) premia for a specific item (coffee) differentiated in a controlled setting by the certifications labels that signal various non-market attributes. Specifically, the author examines the WTP premium for coffee that is eligible for the Certified Employee-OwnedSM label, the Fair Trade CertifiedTM Certified label, as well coffee that qualifies for both labels. Second, the author introduces a treatment to evaluate how the provision of information produced by the third party certifiers affects WTP estimates. And third, the author exploits the use of a controlled setting to evaluate how passive sensory information (i.e. taste) may influence the WTP valuation of the labels.FindingsWTP premia for coffee carrying only the EO label only increase by 67 cents relative to conventional coffee, which was not significantly different from zero. Bids for both FT and EO&FT labeled coffee were, however, positive ($1.22 and $2.17, respectively) and are also statistically significant. The circulation of information to subjects about the certification programs resulted in increased bids. These bid differences were statistically significant for FT and EOFT coffee, but again, not for EO labeled coffee. Finally, differences in tastes did not appear to drive significant differences in bidding behavior, suggesting that WTP consumer decisions are strongly influenced by non-market attributes.Originality/valueMarketers, economists and others have an interest in determining the monetary value individuals place on non-market goods for a variety of reasons; from forecasting new product success to understanding consumer and individual behavior. Unfortunately, many currently available stated preference techniques suffer from hypothetical bias while revealed preference techniques rely on indirect measures. Experimental auctions mitigate some of these issues since they involve individuals exchanging real money for real goods in an active market. WTP valuation has been conducted on a wide variety or products, but none that capture consumer valuation of employee ownership.

IN3 - How Much do Malaysians Value Dengue Vaccine? Evaluating the Willingness to Pay (WTP) for Hypothetical Dengue Vaccine with Two-Part Model (TPM)

Malaysia is experiencing an escalation of dengue cases over the past 5 years. As the dengue vaccine pipeline continues to develop steadily with strong public interests, we seek to elicit the public acceptance and willingness to pay (WTP) for hypothetical dengue vaccine in Malaysia. This study was conducted utilising a cross-sectional and contingent valuation method. A total of 400 respondents in Penang, Malaysia were interviewed to evaluate their acceptance and WTP for 2 hypothetical 3-doses dengue vaccines (Vaccine A with 5 years’ protection and Vaccine B with 10 years’ protection). A double-bounded dichotomous-choice questionnaire via a bidding game approach was employed in eliciting the WTP amount. A simple logistic regression model was applied to assess the key determinants of vaccine’s acceptance, whereas the parametric mean WTP value and factors influencing the WTP value was measured by two-part model (TPM). Results showed that 88.4% of the respondents would vaccinate themselves if the vaccine were provided free. Respondents with better dengue knowledge and vaccination attitude were more likely to accept dengue vaccine. The adjusted mean WTP for the vaccine was MYR43.93 (US$10.59) per dose (MYR131.79 or US$31.77 per vaccinee). The first step logit estimation from TPM showed that respondents with higher education level or accepted the free vaccine were more likely to pay for the vaccine. The second-stage regression from TPM found that key factors that affected the WTP value were age, gender, occupation, household income, and household dengue prevention practice. The strong acceptance and high WTP value towards dengue vaccine indicates its high value among Malaysians. The WTP estimates provides quantification of the vaccine’s private benefit in disease reduction. Although the findings in this study still deserved further investigation, the people’s preferences-based WTP for the vaccine would complement the scientific decision making and prioritization in the dengue management and vaccine roll-out preparation in Malaysia.

The Public Willingness to Pay for Reducing the Incidence of Hazardous Chemical Spill Accidents by Half in South Korea

Hazardous chemical spill (HCS) accidents, which occur due to careless workers, transport accidents, etc., can be harmful to humans. Recently, an average of 96 cases of HCS accidents have taken place in South Korea annually. As a result, the government is trying to reduce the incidence of HCS accidents by 50%. Government officials are seeking information about the value that the enforcement of the reduction plan will bring for the public. This knowledge will help government officials decide whether to implement the reduction plan. This article seeks to acquire information about the public willingness to pay (WTP) for the reduction plan, employing the contingent valuation (CV) technique. For this purpose, a total of 1000 households living in South Korea participated in the CV survey in 2017. The data on the WTP were gathered using a dichotomous choice question and analyzed using the spike model. Forty-five percent of the respondents were willing to accept an increase in income taxes to carry out the reduction plan. The mean household WTP estimate was obtained as KRW 3830 (USD 3.41) per annum. The national value expanded from the sample to the population is worth KRW 74.8 billion (USD 66.6 million) per year. This value implies the public value of the reduction plan and can be applied in policy analysis and decision-making concerning the reduction of the incidence of HCS accidents.

Public preferences for district heating system over individual heating system: a view from national energy efficiency

The price of residential heating from the district heating system is similar to that from the individual heating system in Korea. However, the former is known to be more efficient in terms of national energy consumption than the latter in urban areas with high population density. Because district heating system reduces the total amount of energy consumption by 24% compared to individual heating system. This paper attempts to assess the public preferences for substituting consumption of residential heating produced from individual heating system with that produced from district heating system in terms of national energy efficiency. To apply contingent valuation method, a contingent valuation survey of 1000 households was implemented. Public preferences can be provided price gap, which is willingness to pay (WTP) and the findings can be interpreted as external benefits. For the purpose of mitigating the response effect in eliciting their WTP and increasing statistical efficiency in analyzing the WTP data, we employ a one-and-one-half-bounded dichotomous choice question format. Furthermore, we use the spike model so as to model zero WTP responses. The results show that the mean additional WTP for district heating system over individual heating system is estimated to be KRW 8544 per KRW 100,000 of residential heating. The WTP estimate is statistically significant at the 1% level. Thus, the external benefit of the district heating system over individual heating system in terms of national energy efficiency amounts to about 8.5% of the price for residential heating.

Do People Place More Value on Natural Gas Than Coal for Power Generation to Abate Particulate Matter Emissions? Evidence from South Korea

As of 2017, coal is responsible for about half of all power generation in South Korea, while natural gas (NG) is responsible for about 20%. This increases particulate matter (PM) emissions, as coal emits 6 to 55 times more PM than NG in the course of power generation. Increased PM concentration causes visibility impairment and acute respiratory diseases. Thus, the South Korean government is seeking to shift from coal to NG power generation for the purpose of abating PM emissions. The government also considers NG as a bridge energy to facilitate the transition from fossil fuels to renewable energy. This article attempts to answer the question, “Do people place significant value on shifting from coal to NG power generation in order to abate PM?” To this end, additional willingness to pay (WTP) for NG over coal for electricity for the purpose of PM emissions abatement was assessed from 1000 South Koreans’ contingent valuations (CV). More specifically, each of these randomly chosen interviewees was asked about her/his WTP for the switch from coal to NG for 1 kWh of electricity use. The average additional WTP estimate was KRW 31.27 (USD 0.028) per kWh, which is equivalent to 28.8% of the average price of electricity in 2017. Moreover, this estimate is statistically significant. The generation cost of NG is about KRW 100.13 per kWh, which is higher than that of coal (KRW 78.5 per kWh). The gap is KRW 22.08 per kWh, which is less than the additional WTP. Thus, it is obvious that the governmental policy of shifting from coal to NG for power generation in order to abate PM emissions is supported by the public and, hence, the shift should be made gradually.

Mitigating hypothetical bias in willingness to pay studies: post-estimation uncertainty and anchoring on irrelevant information.

One possible source of hypothetical bias in willingness to pay (WTP) estimates is response uncertainty, referring to subject's uncertainty about the value of the good under assessment. It has been argued that uncertainty can be measured using the post-valuation 'certainty question' that asks: 'How certain are you about your stated WTP?' and marks the degree of certainty on a quantitative or a qualitative scale. Research has shown that the self-reported certainty evaluations can help mitigate hypothetical bias and obtain increasingly accurate WTP estimates. These study reports present a simple test of reliability of post-valuation certainty assessment and then looks at the empirical evidence for clues regarding the general usefulness of certainty adjustment in mitigating hypothetical bias in WTP studies. We find that the post-estimation uncertainty scores are malleable, i.e., significantly correlated with entirely irrelevant information. We conclude that more robust evidence could justify the routine inclusion of certainty evaluation in WTP studies although in the meantime the interpretation of certainty-adjusted WTP values should be approached cautiously.

Willingness to Pay for Substituting Coal with Natural Gas-Based Combined Heat and Power in South Korea: A View from Air Pollutants Emissions Mitigation

As of 2017, coal-fired generation is responsible for about half of electricity generation in South Korea. This causes a serious problem of emitting air pollutants such as particulate matters, sulfur oxides, and nitrogen oxides. Thus, the South Korean government is seeking to substitute a part of coal-fired generation with natural gas (NG)-based combined heat and power (CHP) generation for the purpose of mitigating air pollutants emissions. This article tries to assess the public willingness to pay (WTP) for the substitution adopting contingent valuation (CV). The data on the additional WTP for consuming 1 kWh of electricity produced from NG-based CHP generation over coal-fired generation were gathered from a CV survey of 1000 interviewees. The mean additional WTP estimate for the substitution is obtained as KRW 28.08 (USD 0.025) per kWh of electricity use. This is equivalent to 25.9% of the average price of electricity, KRW 108.50 (USD 0.098) per kWh in 2017. It is obvious that the South Korean public has a significant WTP for substituting coal with NG in electricity generation to mitigate air pollutants emissions. The government needs to gradually push for the substitution.

Design Factors Influencing Willingness‐to‐Pay Estimates in the Becker‐DeGroot‐Marschak (BDM) Mechanism and the Non‐hypothetical Choice Experiment: A Case of Biofortified Maize in Zambia

AbstractTwo of the experimental methods used to estimate willingness‐to‐pay (WTP) for a non‐market good, the Becker‐DeGroot‐Marschak (BDM) mechanism and the non‐hypothetical choice experiment (nHCE) often lead to significantly different WTP estimates, complicating the choice between the methods. In Zambia the same group of researchers used both techniques to evaluate WTP for orange maize, which provides more vitamin A than other varieties. This provided an opportunity to analyse the sources of the difference. In the BDM experiment, one group of respondents was provided with more training opportunities than the other, and made higher bids. Accounting for lexicographic behaviour in the nHCE reduced the estimated WTP. These two design factors together resulted in a decrease in the WTP difference for orange maize (1,279–632 ZMK) although the difference remains statistically significant. More training was also shown to eliminate the effects of different orders in which maize varieties were presented.

Can a Repeated Opt-Out Reminder mitigate hypothetical bias in discrete choice experiments? An application to consumer valuation of novel food products

Can a Repeated Opt-Out Reminder mitigate hypothetical bias in discrete choice experiments? An application to consumer valuation of novel food products