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Contingent Valuation

Contingent Valuation. Bangkok 2013. Stated Preference. Attitudinal versus behavioral What people say are their values rather than the implicit values consistent with their behavior Attitudes and behavioral values are not always consistent

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Contingent Valuation

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  1. Contingent Valuation Bangkok 2013

  2. Stated Preference • Attitudinal versus behavioral • What people say are their values rather than the implicit values consistent with their behavior • Attitudes and behavioral values are not always consistent • People tend to believe in loftier (more socially correct) values than they actually use

  3. Attitudinal Questions • Excellent mechanism to gauge qualitative information • People’s ranking of good A versus good B • Which is better: program A or program B • Less perfect mechanism for quantitative values • Extra dollar value of a 1/10,000 risk versus a 1/1,000 risk • Can people place a value on the environment?

  4. Method • Ask people dollar value of the environment • “What are you willing to pay in higher entrance fees to plant more trees in your local city park?” • “What are you willing to pay in higher taxes to double the size of the Mangrove forest in Bangladesh?” • “What are you willing to pay in higher prices for food to preserve the Bengal tiger in India?”

  5. Application- Valuation • Existing environmental site (park or forest) • Environmental investment (new forest) • Altered management (buses rather than cars in a park) • Environmental characteristic (preserve a species, protect ancient versus young trees, eliminate an invasive species)

  6. Payment vehicle • The “payment vehicle” is the way the respondent is to pay for the good in question • Needed to make the question seem realistic • Can use taxes, prices, lost income • Note that the respondent may care which payment vehicle is used

  7. Comparison with Revealed Preference • CV yields similar responses to markets for market goods (used to predict consumer response to new products) • CV yields similar response to travel cost of familiar sites (local fishing site, favorite park) • Not clear that CV yields reliable response to unfamiliar environmental goods (Antarctica) • Unreliable response to existence value

  8. Limitations • People need to be familiar with good being valued • Cannot value a ton of greenhouse gas because people do not know what damage is caused by a ton of greenhouse gas • Cannot value “your favorite park” because not clear what park that is • Need to provide information to be clear what the good is that is being valued

  9. Information tends not to be neutral • Some information is purely a fact (hectares of forest) • Much information is value laden • “Unique natural landscape” • “Precious remaining forest” • “Threatened tigers” • Provision of information can bias responses by tapping values even more important than the environment

  10. Value Exxon Valdez Oil Spill • Spill was unfortunate accident in pursuit of energy independence • Spill was worsened because government containment boats were broken • Captain of ship was drunk • Exxon was most profitable company in the world • Spill damaged pristine waterways • There were no people where the spill occurred

  11. WTP vs WTA • Cannot use willingness to accept (WTA) questions to value goods • Respondents instinctively bargain with WTA • Average WTA answer is seven times WTP answer • Consistently biased upwards

  12. Protest votes • Some respondents reject the premise of the CV question and “protest” by answering “zero” • Reasons • Not responsible to pay (government or business responsibility) • Reject the payment vehicle • May not feel project will occur even if respondent pays

  13. Remove protest votes • Need to distinguish between protest votes and real zero response • Ask attitudinal questions about who should pay to protect the environment, person’s confidence project will be undertaken, feelings about taxes • Remove observations that are zero and answer attitude questions in hostile manner

  14. Existence Value • What will people pay for a distant natural site to exist? • What will people pay for a specific species to exist? • Answer is rarely zero. • Yet there are hundreds of thousands of distant places and species. What would people pay for all of them? What share belongs to each site and species?

  15. Exercise • Design a contingent valuation question of the most famous natural site in your country • Include information about the site • Administer the survey to 20 people in the room who are not from your country • Examine the responses

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