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Reply to “a comment on ‘three reasons to use annual payments in contingent valuation’”

Author

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  • Egan, Kevin J.
  • Corrigan, Jay R.
  • Dwyer, Daryl F.

Abstract

Whitehead (2017) suggests the contingent valuation (CV) data from Egan et al. (2015) lacks theoretical validity and has a “fat tails” problem, while also questioning our conclusion that CV surveys using annual payments produce willingness to pay (WTP) estimates that better match consumer surplus estimates from a travel cost model. In this reply, we use likelihood ratio tests to show that our CV data is theoretically valid. We use the Turnbull and Kriström distribution-free estimators to show that our CV data generate economically significant WTP estimates with small standard errors. Finally, we apply the sensitivity analyses from our original paper to Whitehead's results. These sensitivity analyses overwhelmingly support our original conclusion in favor of using annual payments in CV surveys.

Suggested Citation

  • Egan, Kevin J. & Corrigan, Jay R. & Dwyer, Daryl F., 2018. "Reply to “a comment on ‘three reasons to use annual payments in contingent valuation’”," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 489-495.
    • Handle: RePEc:eee:jeeman:v:88:y:2018:i:c:p:489-495
    DOI: 10.1016/j.jeem.2017.06.003
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    References listed on IDEAS

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    1. Haab, Timothy C. & McConnell, Kenneth E., 1997. "Referendum Models and Negative Willingness to Pay: Alternative Solutions," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 251-270, February.
    2. Kanninen Barbara J., 1995. "Bias in Discrete Response Contingent Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 114-125, January.
    3. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
    4. Li Chuan-Zhong & Mattsson Leif, 1995. "Discrete Choice under Preference Uncertainty: An Improved Structural Model for Contingent Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 256-269, March.
    5. George Parsons & Kelley Myers, 2017. "Fat tails and truncated bids in contingent valuation: an application to an endangered shorebird species," Chapters, in: Daniel McFadden & Kenneth Train (ed.), Contingent Valuation of Environmental Goods, chapter 2, pages 17-42, Edward Elgar Publishing.
    6. Timothy C. Haab & Kenneth E. McConnell, 2002. "Valuing Environmental and Natural Resources," Books, Edward Elgar Publishing, number 2427.
    7. Champ, Patricia A. & Bishop, Richard C. & Brown, Thomas C. & McCollum, Daniel W., 1997. "Using Donation Mechanisms to Value Nonuse Benefits from Public Goods," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 151-162, June.
    8. Egan, Kevin J. & Corrigan, Jay R. & Dwyer, Daryl F., 2015. "Three reasons to use annual payments in contingent valuation surveys: Convergent validity, discount rates, and mental accounting," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 123-136.
    9. Krinsky, Itzhak & Robb, A Leslie, 1986. "On Approximating the Statistical Properties of Elasticities," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 715-719, November.
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    Cited by:

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    3. Gregory Howard & John C. Whitehead & Jacob Hochard, 2020. "Estimating Discount Rates Using Referendum-style Choice Experiments: An Analysis of Multiple Methods," Working Papers 20-01, Department of Economics, Appalachian State University.

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    More about this item

    Keywords

    Q5; Q51; Q26; Discounting; Contingent valuation; Convergent validity; Willingness to Pay; nonparametric estimation; fat tails problem; Turnbull Estimator; Kriström Estimator;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Who Knows What Willingness to Pay Lurks in the Hearts of Men? A Rejoinder to Egan, Corrigan, and Dwyer (EJW 2017) in ReplicationWiki
    2. Three reasons to use annual payments in contingent valuation surveys: Convergent validity, discount rates, and mental accounting (J Env Econ & Management 2015) in ReplicationWiki
    3. A comment on “Three reasons to use annual payments in contingent valuation” (J Env Econ & Management 2018) in ReplicationWiki

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