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Estimating WTP With Uncertainty Choice Contingent Valuation

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  • Kelvin Balcombe
  • Aurelia Samuel
  • Iain Fraser

Abstract

A method for treating Contingent Valuation data obtained from a polychotomous response format designed to accommodate respondent uncertainty is developed. The parameters that determine the probability of indefinite responses are estimated and used to truncate utility distributions within a structural model. The likelihood function for this model is derived, along with the posterior distributions that can be used for estimation within a Bayesian Monte Carlo Markov Chain framework. We use this model to examine two data sets and test a number of model related hypotheses. Our results are consistent with those from the psychology literature relating to uncertain response: a ‘probable no’ is more likely to suggest a defiite no, than a ‘probable yes’ is likely to suggest a definite yes. We also find that ’don’t know’ responses are context dependent. Comparing the performance of the methods developed in this paper with the ordered Probit which has been previously used in the literature with this type of data we find our methods outperform the ordered Probit for one of the data sets used.

Suggested Citation

  • Kelvin Balcombe & Aurelia Samuel & Iain Fraser, 2009. "Estimating WTP With Uncertainty Choice Contingent Valuation," Studies in Economics 0921, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:0921
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    References listed on IDEAS

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    1. Vossler, Christian A. & Kerkvliet, Joe & Polasky, Stephen & Gainutdinova, Olesya, 2003. "Externally validating contingent valuation: an open-space survey and referendum in Corvallis, Oregon," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 261-277, June.
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    3. Alberini, Anna & Boyle, Kevin & Welsh, Michael, 2003. "Analysis of contingent valuation data with multiple bids and response options allowing respondents to express uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 40-62, January.
    4. Ready Richard C. & Whitehead John C. & Blomquist Glenn C., 1995. "Contingent Valuation When Respondents Are Ambivalent," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 181-196, September.
    5. Welsh, Michael P. & Poe, Gregory L., 1998. "Elicitation Effects in Contingent Valuation: Comparisons to a Multiple Bounded Discrete Choice Approach," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 170-185, September.
    6. Kelvin Balcombe & Iain Fraser, 2009. "Dichotomous-choice contingent valuation with 'dont know' responses and misreporting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1137-1152.
    7. Cameron Trudy Ann & Quiggin John, 1994. "Estimation Using Contingent Valuation Data from a Dichotomous Choice with Follow-Up Questionnaire," Journal of Environmental Economics and Management, Elsevier, vol. 27(3), pages 218-234, November.
    8. Timothy C. Haab & Kenneth E. McConnell, 2002. "Valuing Environmental and Natural Resources," Books, Edward Elgar Publishing, number 2427.
    9. F. Thomas Juster, 1966. "Consumer Buying Intentions and Purchase Probability: An Experiment in Survey Design," NBER Books, National Bureau of Economic Research, Inc, number just66-2, February.
    10. Wang, Hua, 1997. "Treatment of "Don't-Know" Responses in Contingent Valuation Surveys: A Random Valuation Model," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 219-232, February.
    11. Vossler, Christian A. & Poe, Gregory L., 2005. "Analysis of contingent valuation data with multiple bids and response options allowing respondents to express uncertainty: a comment," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 197-200, January.
    12. Boman, Mattias, 2009. "To pay or not to pay for biodiversity in forests - What scale determines responses to willingness to pay questions with uncertain response options?," Journal of Forest Economics, Elsevier, vol. 15(1-2), pages 79-91, January.
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    Cited by:

    1. Kehlbacher, A. & Bennett, R. & Balcombe, K., 2012. "Measuring the consumer benefits of improving farm animal welfare to inform welfare labelling," Food Policy, Elsevier, vol. 37(6), pages 627-633.
    2. Pierre-Alexandre Mahieu & Pere Riera & Bengt Kriström & Runar Brännlund & Marek Giergiczny, 2014. "Exploring the determinants of uncertainty in contingent valuation surveys," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(2), pages 186-200, July.

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    More about this item

    Keywords

    Respondent uncertainty; multiple bound contingent valuation; Bayesian MCMC;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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