Bateman 1995 - Ecological Economics

8/20/2019 Bateman 1995 - Ecological Economics

1/19

E L S E V I E R

Ecological Economics 12 (1995) 161-179

E C O L O G I C A L

E C O N O M I C S

l i c i t a t i o n a n d t r u n c a t i o n e f f e c t s i n c o n t i n g e n t v a l u a t i o n s t u d i e s

I a n J . B a t e m a n a , b , , I a n H . L a n g f o r d a , b , R . K e r r y T u r n e r a , b , K e n G . W i l li s c

uy

D . G a r r o d d

a S c h o o l o f E n v i r o n m e n t a l Sc ie n ce U n iv er si ty o f E a s t A n g l ia N R 4 7 T J N o r w i c h U K

b C e n t r e f o r S o c i a l a n d E c o n o m i c R e s e a r c h o n t h e G l o b a l E n v i r o n m e n t U n iv er si ty o f E a s t A n g l i a a n d U n iv er si ty C o ll eg e L o n d o n U K

c Dept . o f Town and Country P lann ing Universi ty o f Newc as t le Upon Tyne Newcas t le UK

d D e p t . o f A g r i c u l t u r a l E c o n o m i c s a n d F o o d M a r k et i n g U n iv er si ty o f N e w c a s t l e U p o n T y n e N e w c a s t le U K

Received 14 December 1993; accepted 30 June 1994

Abstrac t

The conti ngent valuation method (CVM) uses surveys of expressed pre ferences to evaluate willingness to pay for

(generally) non-ma rket, envi ronme ntal goods. This a pproach gives the method theoretical applicability to an

extensive range of use and passive-use values associated with such goods. However, recent years have seen the

method come under sustained empirical and theoretical attack by critics who claim that the expressed preference

statemen ts given by respon dents to CVM questions are subject to a variety of biases to the extent that tru e

valuations cannot be inferred. This debate was reviewed and assessed in the recent report of the US, NOAA

blue -ri bbo n panel which gave cautious approval to the meth od subject to adherence to a rigorous testing protocol.

This paper reports findings from the first UK CVM study to generally conform to those guidelines. The major

objective of the research reported on h ere is the analysis of the effects of altering the method of eliciting willingness

to pay (WTP) responses. Three WTP elicitation methods are employed: open-ended questions (where the respon-

dent is free to give any answer); dichotomous choice questions (requiring a ye s/ no response regardi ng a set WTP bid

level); and iterative bidding questions (where a r espon dent is free to move up or down from a given WTP starting

point). Results indicate that respo ndents experience significant uncerta inty in answering open -end ed questions and

may exhibit free-riding or strategic overbid ding tendencies (although this is less certain). Whe n answering dichoto-

mous choice questions respo ndent s seem to experience much less uncerta inty although the suggestion that bid levels

affect responses cannot be ruled out, and it is clear that respondents behave somewhat differently to dichotomous

choice as opposed to open-ended formats. The iterative bidding approach appears to provide a halfway house with

respo ndents exhibiting certain of the characteristics of both the ot her formats. We co ncluded that the level of

uncer tainty induced by open -end ed formats is a major concern, and that furth er research into the microeco nomic

motivations of individuals responding to iterative bidding and dichotomous choice CV surveys is high priority. A

further aim of the analysis was to test for changes in estimated m ean WT P ind uced by the application of different

Correspondence to: I.J. Bateman, School of Environmen-

tal Sciences, University of East Anglia, NR4 7TJ, Norwich,

UK.

0921-8009/95/$09.50 © 1995 Elsevier Science B.V. All rights reserved

S S D I 0921-8009(94)00044-1


2/19

162

LJ. Bateman et al. /Ecol ogical Economics 12 1995) 161-179

forms of truncation across all elicitation methods Reco mmen datio ns are made on appropriate tr uncation strategies

for each elicitation method

Keywords:

Contingent valuation; Willingness to pay

I I n t r o d u c t i o n

L i t i g a t i o n o v e r n a t u r a l r e s o u r c e d a m a g e s , p a r -

t i c u l a r l y o i l s p i ll d a m a g e c a s e s , i n t h e U S A h a s

m o s t r e c e n t l y l e d to a f u r t h e r u p s u r g e o f i n t e r e s t

i n , u s e o f a n d d e b a t e o v e r t h e c o n t i n g e n t v a l u a -

t i o n m e t h o d ( C V M ) . F o l l o w i n g C V a s s e s s m e n t o f

p a s s i v e - u se l o s s i n c u r r e d b y t h e E x x o n V a l d e z o i l

s p i l l ( C a r s o n e t a l . , 1 9 9 2 ) i n 1 9 9 2 , t h e E x x o n

c o m p a n y c o m m i s s io n e d a n u m b e r o f C V s tu d i e s

a n d o r g a n i s e d a p u b l i c s e m i n a r w h i c h h e a v i l y

c r i ti c i se d b o t h t h e r e l ia b i l it y a n d v a l i d it y o f t h e

m e t h o d ( C a m b r i d g e E c o n o m i c s , 1 99 2) . A w e e k

l a te r th e U S D e p a r t m e n t o f C o m m e r c e ' s N a -

t io n a l O c e a n i c a n d A t m o s p h e r i c A d m i n i s t r a t i o n

( N O A A ) , w h i c h h a s re s p o n s i b i li t y f o r p r o m u l g a t -

i n g t h e r e g u l a t i o n s f o r t h e a s s e s s m e n t o f n a t u r a l

r e s o u r c e d a m a g e s u n d e r t h e O i l P o l lu t i o n A c t o f

1 9 90 , a n n o u n c e d t h a t it w a s s e tt i n g u p a b l u e -

r i b b o n p a n e l u n d e r th e j o i n t C h a i r m a n s h i p o f

K e n n e t h A r r o w a n d R o b e r t S o l o w t o ad v i se o n

t h e u s e o f C V i n n a t u r a l r e s o u r c e d a m a g e a s s e s s-

m e n t s f o r o il sp il ls . T h e N O A A p a n e l c o n c l u d e d

t h a t C V st u d ie s c a n p r o d u c e e s ti m a t e s r e l ia b l e

e n o u g h t o b e t h e s t a r t in g p o i n t f o r a j u d i c i a l o r

a d m i n i s tr a t iv e d e t e r m i n a t i o n o f n a t u r a l r e s o u r c e

d a m a g e s . . . T o b e a c c e p t a b le f o r t h is p u r p o s e ,

t h o u g h , s u c h s t u d i e s s h o u l d a d h e r e c l o s e l y t o t h e

g u i d e l i n e s d e s c r i b e d i n t h is r e p o r t ( A r r o w e t al .,

1 9 9 3 ) . T h u s t h e t e s t i n g p r o t o c o l h a s b e e n g i v e n

p r i m e i m p o r t a n c e i n t h e P a n e l ' s q u a l i f i e d a c c e p -

t a n c e o f C V M .

1 .1 . B lu e - r ib b o n p a n e l s t e s ti n g p ro to c o l

T h e f o l l o w i n g m a i n g u i d e l i n e s , n o t in a n y r a n k

o r d e r , h a v e b e e n s u g g e s te d b y t h e P a n e l ( A r r o w

et a l . , 1993) :

1. F o r a s in g le d i c h o t o m o u s q u e s t i o n ( y e s - n o

t y p e ) f o r m a t , a t o t a l s a m p l e s iz e o f a t le a s t

1 0 0 0 r e s p o n d e n t s i s r e q u i r e d . C l u s t e r i n g a n d

s t r a t i f i c a t i o n i s s u e s s h o u l d b e a c c o u n t e d f o r

a n d r a n d o m s u b - s a m p l i n g w i ll b e r e q u i r e d t o

o b t a i n a b i d c u r v e . T e s t i n g f o r i n t e r v i e w e r

a n d w o r d i n g b ia s e s is al so r e c o m m e n d e d .

2 . H i g h n o n - r e s p o n s e r a t e s w o u l d r e n d e r t h e

s u r v e y u n r e l i a b l e .

3 . F a c e - t o - f a c e i n t e r v i e w i n g i s l i k e ly t o y i e l d t h e

m o s t r e l i a b l e r e s u l t s .

4 . F u ll r e p o r t i n g o f d a t a a n d q u e s t i o n n a i r e s i s

r e q u i r e d f o r g o o d p r a c t i c e .

5 . P i l o t s u r v e y i n g a n d p r e t e s t i n g a r e e s s e n t i a l

e l e m e n t s i n a n y C V s t u d y .

6 . A c o n s e r v a t i v e d e s ig n m o r e l i k e ly t o u n d e r e s -

t i m a t e W T P i s t o b e p r e f e r r e d t o o n e l i k el y t o

o v e r e s t i m a t e W T P .

7 . W T P f o r m a t is p r e f e r r e d .

8 . T h e v a l u a t i o n q u e s t i o n s h o u l d b e p o s e d a s a

v o t e o n a r e f e r e n d u m , i . e . , a d i c h o t o m o u s

c h o i c e q u e s t io n r e l a t e d t o t h e p a y m e n t o f a

p a r t i c u l a r l e v e l o f t a x a t i o n .

9 . A c c u r a t e i n f o r m a t i o n o n t h e v a l u a t i o n s i tu a -

t i o n m u s t b e p r e s e n t e d t o r e s p o n d e n t s ; p a r -

t i c u l a r c a r e is r e q u i r e d o v e r t h e u s e o f p h o -

t o g r a p h s .

10 . R e s p o n d e n t s m u s t b e r e m i n d e d o f t h e s t a tu s

o f a n y u n d a m a g e d p o s si b le s u b s ti tu t e c o m -

m o d i t i e s .

11 . T i m e - d e p e n d e n t m e a s u r e m e n t n o i s e s h o u l d

b e r e d u c e d b y a v e r ag i n g a cr o ss i n d e p e n d -

e n t l y d r a w n s a m p l e s t a k e n a t d i f f e r e n t p o i n t s

i n t i m e .

1 2. A n o - a n s w e r o p t i o n s h o u l d b e e x p l ic i tl y

a l l o w e d i n a d d i t i o n t o t h e y e s a n d n o

v o t e o p t i o n s o n t h e m a i n v a l u a t i o n q u e s t i o n .

1 3. Y e s a n d n o r e s p o n s e s s h o u l d b e f o l l o w e d u p

b y t h e o p e n - e n d e d q u e s ti o n : w h y d id y o u

v o t e y e s / n o ?

1 4. C r o s s - t a b u l a t i o n s : t h e s u r v e y s h o u l d i n c l u d e

a v a r i e ty o f o t h e r q u e s t i o n s t h a t h e l p t o i n t e r -

p r e t t h e r e s p o n s e s t o t h e p r i m a r y v a l u a ti o n

q u e s t i o n , i . e . , i n c o m e , d i s t a n c e t o t h e s i t e ,

p r i o r k n o w l e d g e o f t h e s i te , e t c .


3/19

L J . B a t e m a n e t a l . / E c o lo g i c a l E c o n o m i c s 1 2 1 9 95 ) 1 6 1 - 1 7 9 1 6 3

1 5. R e s p o n d e n t s m u s t b e r e m i n d e d o f a l t e rn a t i v e

e x p e n d i t u r e p o s s i b i li t ie s , e s p e c i a l l y w h e n

w a r m - g l o w e f f e c t s a r e l ik e l y t o b e p r e v a -

l e n t ( i. e ., p u r c h a s e o f m o r a l s a t i s f a c t io n

t h r o u g h t h e a c t o f c h a r i t a b l e g iv in g ).

I n t h i s p a p e r w e r e p o r t o n s e l e c t e d a s p e c t s o f

a r e c e n t l a r g e s a m p l e ( n e a r l y 3 0 0 0 i n t e r v ie w s ) C V

s t u d y o f a n i n t e r n a t io n a l l y i m p o r t a n t U K w e t l a n d

( t h e N o r f o l k B r o a d s ) u n d e r i n c r e as i n g t h r e a t f r o m

N o r t h S e a s a l t- w a t e r i n t ru s i o n a n d r e q u i r in g n e w

f l o o d p r o t e c t i o n i n v e s t m e n t s . W e w i l l b r i e f l y

c o m p a r e t h e w e t l a n d C V s t u d y d e s ig n a n d m e t h o d

a g a i ns t t h e B l u e - R i b b o n P a n e l ' s p r o t o c o l , b u t

d e v o t e m o s t o f t h e a n a l y si s to a n a s s e s s m e n t o f

t h e e l i c i t a t i o n f o r m a t u s e d . I n a b r i e f e r d i s c u ss i o n

w e a ss e ss t h e i m p a c t o f v a ri o u s s a m p l e t r u n c a t i o n

s t r a t e g i e s u p o n e a c h f o r m a t .

T h e m a j o r r e s e a r c h f o c u s o f th i s s tu d y c o n -

c e r n s g u i d e l i n e 8 a b o v e r e g a r d i n g W T P e l ic i ta -

t io n m e t h o d . T h e f o ll o w in g t h r e e a p p r o a c h e s ( i n -

c l u d in g th e N O A A p a n e l ' s p r e f e r r e d d i c h o t o -

m o u s c h o i c e f o r m a t ) w e r e t e s t e d :

i. O p e n e n d e d ( O E ) ; h e r e t h e r e s p o n d e n t i s

a s k e d H o w m u c h a r e y o u w i ll in g t o p a y ?

T h e r e s p o n d e n t is t h e r e f o r e f r e e t o s ta t e a n y

a m o u n t ( c f . B r o o k s h i r e e t a l . , 1 9 8 3 ) .

ii. D i c h o t o m o u s c h o i c e ( D C ) ; h e r e r e s p o n d e n t s

a r e a s k e d A r e y o u w i ll in g t o p a y £ X ? w i t h

t h e b i d l e v e l X b e i n g s y s t e m a t i c a ll y v a r i e d

a c r o s s t h e s a m p l e ( c f. B i s h o p a n d H e b e r l e i n ,

1979) .

i i i . I t e r a t i v e b i d d i n g ( I B ) ; h e r e t h e i n t e r v i e w e r

s t a t e s a n i n i ti a l W T P b i d l e v e l w h i c h m a y b e

f i x ed a c r o s s t h e s a m p l e o r v a r i e d s y s t e m a t i -

c a ll y a s i n t h e D C a p p r o a c h . T h e r e s p o n d e n t

is t h e n a s k e d i f t h e y a r e W T P t h is a m o u n t . I f

t h e y r e p l y p o s i t i v e l y , t h e n t h e b i d l e v e l i s

i n c r e a s e d , w h i l e i f t h e y r e p l y n e g a t i v e l y , t h e n

t h e b i d l e v e l is d e c r e a s e d , a n d t h e W T P q u e s -

t i o n i s a s k e d a g a i n ( c f . R a n d a l l e t a l . , 1 9 7 4 ) .

P r e c i se d e t a i l s o f th e p a r t i c u l a r I B g a m e u s e d

a r e g i v e n b e lo w .

B e f o r e w e t u r n t o c o n s i d e r t h e d e t a i l o f th i s

s t u d y , w e w i s h t o e m p h a s i s e t h a t w e a r e a d d r e s s -

i n g o n l y c e r t a i n o f t h e i s su e s r a i s e d b y u s e o f t h e

C V M a n d r e c o g n i s e t h a t s u c h a n a n a ly s is c a n n o t

o f i t s e lf p r o v i d e a s u f f i c i e n t b a si s f o r v a l i d a t i o n o f

t h e m e t h o d .

2 N o r f o l k B r o a d s w e t la n d C V

T h e N o r f o l k B r o a d s i s a u n i q u e w e t l a n d a r e a

l o c a t e d in t h e E a s t A n g l i a n a r e a o f E n g l a n d

w h i c h , d u e t o t h e a g e o f e x i s ti n g d e f e n c e s , i s

u n d e r i n c r ea s i n g t h r e a t o f s a li n e f l o o d in g f r o m

t h e N o r t h S e a . A n u m b e r o f f l o o d a ll e v ia t io n

s c h e m e s h a v e b e e n s u g g e s t e d , i n c l u d i n g t h e

s t r e n g t h e n i n g o f e x i st in g r i v er w a ll s a n d / o r t h e

c o n s t r u c t i o n o f a m o v a b l e t id a l b a r r i e r . A s p a r t o f

a c o s t - b e n e f i t s t u d y o f t h e a v a i l a b l e o p t io n s , a

C V s t u d y w a s u n d e r t a k e n i n o r d e r t o e s t i m a t e a

u s e r v a l u e f o r t h e c o n s e r v a t i o n o f t h e a r e a i n i ts

c u r r e n t s t a t e . ~

O u r w e t l a n d C V s t u d y m e e t s t h e r e q u i r e m e n t s

o f t h i r t e e n o f t h e f i f t e e n g u i d e l i n e s s e t o u t b y t h e

B l u e - R i b b o n P a n e l . I n t h e c a s e o f g u i d e l in e s t e n

a n d e l e v e n w e w o u l d a r g u e t h a t t h e u n i q u e n a -

t u r e o f B r o a d l a n d p r e c l u d e s t h e u s e o f th e f o r -

m e r a n d , t h e l a t t e r i s n o t p a r t i c u l a r l y r e l e v a n t t o

t h e v a l u a t i o n c o n t e x t u n d e r t e s t , i . e . , u n l i k e t h e

E x x o n V a l d e z o i l s p il l i n c i d e n t w h e r e a r e s p o n s e -

d e c a y o v e r t i m e i s l ik e ly , d e t e r i o r a t i o n i n t h e

N o r f o l k B r o a d s f l o o d d e f e n c e s i s a g r a d u a l a n d

o n g o i n g p r o c e s s ( a l t h o u g h w e r e c o g n i s e t h e v a l i d -

i t y a n d d e s i r a b i l i t y o f r e t e s t i n g ) .

A l a r g e - s c a l e ( 2 8 9 7 u s e a b l e i n t e r v i e w s ) , o n - s i t e ,

f a c e - t o - fa c e C V M s u r ve y w a s u n d e r t a k e n d u r i n g

A u g u s t a n d S e p t e m b e r o f 19 91 . I n f o r m a t i o n r e -

g a r d i n g t h e p r e s e n t a n d p r o j e c t e d f l o o d e d n a t u r e

o f B r o a d l a n d 2 w a s p r e s e n t e d a n d s t a n d a r d i se d

v ia a c o n s t a n t in f o r m a t i o n s t a t e m e n t w h i c h w a s

r e a d o u t t o a l l r e s p o n d e n t s . T h i s a l s o i n f o r m e d

r e s p o n d e n t s a b o u t t h e f e a s ib i l it y o f r e s t o r i n g f lo o d

d e f e n c e s s o a s t o a l l e v i a t e f l o o d r i s k . T h e q u e s -

t i o n n a i r e w a s e x t e n s i v e l y p i l o t e d ( s e e d i s c u s s io n

b e l o w ) a n d w a s d e s i g n e d t o m i n im i s e s o u r c e s o f

b i a s w h i l s t o b t a i n i n g a f u l l d a t a b a s e r e g a r d i n g

1 I n a d d i t i o n t o t h i s u s e r v a l u e , a m a i l s u r v e y o f n o n - u s e r s

t h r o u g h o u t t h e U K w a s a l s o u n d e r t a k e n ( s e e B a t e m a n e t a l. ,

1 9 9 2 ) .

2 A l l i m p a c t s w e r e d e t a i l e d , h o w e v e r , n o r m a t i v e s t a t e m e n t s

s u c h a s l o s s e s o r g a i n s w e r e a v o i d e d .


4/19

1 6 4 l .J . B a t e m a n e t a l. / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9

r e s p o n d e n t s ' c h a r a c t e r i s t i c s s o a s t o p e r m i t t h o r -

3

o u g h a n a ly s is o f W T P r e s p o n se s .

T h e W T P q u e s t i o n w a s p h r a s e d s o a s t o p r e -

s e n t a r e a d i ly u n d e r s t o o d , c l e a r c u t s c e n a r i o : h o w

m u c h w o u l d t h e r e s p o n d e n t b e W T P t o p r e v e n t

f l o o d i n g ? T h i s p r o v i d e s a n e q u i v a l e n t s u r p l u s

w e l f a r e m e a s u r e o f W T P t o a v o i d l os s. T h e f in a l

( p o s t- p i lo t ) w o r d i n g o f t h e O E W T P q u e s t i o n w a s

as fo l l ows :

N o w , r e m e m b e r i n g t h a t a n y m o n e y w h i c h yo u

s p e n d o n t h e B r o a d s y o u c a n n o t s p e n d e ls e -

w h e r e , p l e a s e c o n s i d e r c a r e f u l ly h o w m u c h

m o r e i n ta x e s y o u w o u l d b e w i ll in g t o p a y o v e r

t h e c o m i n g y e a r i n o r d e r t o p r e v e n t f l o o d in g

a n d p r e s e r v e t h e B r o a d s i n t h e i r p r e s e n t s t a t e

d u r i n g th a t t i m e ? A n y a m o u n t w h i c h y o u o f f e r

w i ll o n l y b e s p e n t o n p r e s e r v i n g t h e B r o a d s ,

n o t h i n g e l s e .

T h e W T P q u e s t i o n f o r I B a n d D C f o r m a t s u s e d a

s i m i l a r p r e a m b l e t o t h e a b o v e .

2.1. Elicitation method testing: theoretical expecta

tions and potential biases

T h e n u m b e r a n d l e v e l o f b i d s u s e d f o r th e D C

e x p e r i m e n t w e r e s e t u si n g d a t a o b t a i n e d f r o m a n

3 T h e q u e s t i o n n a i r e w a s d e s i g n e d t o p e r m i t t h e f o ll o w i ng

a n a l y s e s: ( i ) c a t e g o r i s a t i o n a n d f r e q u e n c y o f v i s it t y p e s ( h o l i -

d a y , d a y t r i p , w o r k e r , r e s i d e n t ) ; ( i i ) p a r t y a n d h o u s e h o l d

c o m p o s i t i o n ; ( i i i ) l o c a t i o n o f h o m e / o r i g i n o f t r i p ; ( i v ) p r i m a r y

a n d s u b s i d i a r y r e c r e a t i o n a l a c t i v i t i e s ; ( v ) s u b j e c t i v e a s s e s s -

m e n t s o f e n v i r o n m e n t a l q u a l i t y ; ( v i ) p r e f e r e n c e s r e g a r d i n g

c h a n g e in t h e n a t u r a l / m a n - m a d e B r o a d l an d e n v i r o n m e n t ;

( vi i) a n n u a l r e c r e a t i o n a l / e n v i r o n m e n t a l b u d g e t s ; ( vi ii ) W T P

a n y t h i n g a t a ll ; ( ix ) a n n u a l W T P q u e s t i o n ( e i t h e r O E o r

D C / I B ) ; ( x) l e n g t h o f c o m m i t m e n t ( y e a rs ) to s t a t e d W T P

s u m ; ( x i ) l u m p s u m W T P q u e s t i o n s ( a l l O E ) ; ( x i i ) r e a s o n s f o r

r e f u s a l t o p a y ( w h e r e r e l e v a n t ) ; ( x i i i ) p r e d i c t e d v i s i t a t i o n / e n -

j o y m e n t u n d e r t h e f l o o d e d s c e n a r i o ; ( xi v ) i n c o m e ; ( x v ) A g e ;

( xv i) m e m b e r s h i p o f o r g a n i s a t io n s . M o s t o f t h e a b o v e a r e

s e l f - e x p l a n a t o r y , h o w e v e r : ( v i i) w a s d e s i g n e d t o c h e c k o n

p o t e n t i a l m e n t a l a c c o u n t i n g p r o b l e m s a s w e l l a s r a i s i n g r e -

s p o n d e n t s r e c o g n i t i o n o f i n c o m e c o n s t r a i n t s ; ( x ) c h e c k s

w h e t h e r r e s p o n d e n t s t r u ly p e r c e i v e W T P q u e s t i o n s a s b e i n g

a n n u a l p a y m e n t s ( a s a sk e d ) o r a s o n c e a n d f o r a ll l u m p s u m s ;

( x i ) a l l o w s c o m p a r i s o n w i t h a n n u a l s u m a n d c a l c u l a t i o n o f

i m p l i c i t d i s c o u n t r a t e . I n a d d i t i o n r e c o r d s o f t h e i n t e r v i e w e r s

( a n d s e x ) , i n t e r v i e w d a y ( i . e . , w e e k / w e e k - e n d e f f e c t ) ,

d a t e / s e a s o n e f f e c ts a n d w e a t h e r c o n d i t i o n s w e r e a l so a n a l-

y s e d . F u r t h e r d e t a i l s a r e g i v e n i n B a t e m a n e t a l . (1 9 93 ) .

O E p i l o t s tu d y ( d e t a i l e d s u b s e q u e n t l y ) . T h e I B

e x p e r i m e n t w a s a p p l i e d t o a ll th o s e r e s p o n d e n t s

i n it ia l ly p r e s e n t e d w i t h a D C b i d l e v e l. I f a r e -

s p o n d e n t a n s w e r e d p o s i t iv e l y t o t h e D C b i d , t h i s

b i d w a s t h e n d o u b l e d a n d t h e W T P q u e s t i o n

a s k e d a g a i n . H o w e v e r , i f t h e r e s p o n s e t o t h e

i n i t i a l D C q u e s t i o n w a s n e g a t i v e , t h e n t h e b i d

a m o u n t w a s h a l v e d a n d t h e W T P q u e s t i o n a s k e d

a g a in . T h e p r o c e d u r e w a s t h e n r e p e a t e d g i v e n

t h e a n s w e r t o t h e s e c o n d a r y q u e s t io n s t o p r o v i d e

i n t o t al a t r ip l e b o u n d e d s e t o f y e s / n o a n s w e rs .

F i n a ll y r e s p o n d e n t s w e r e a s k e d a n o p e n - e n d e d

m a x i m u m W T P q u e s t io n . T h e f u ll s et o f p o s s ib l e

I B q u e s ti o n s e m a n a t i n g f r o m o n e D C s t a rt in g

l e v e l ( h e r e £ 1 0 0 ) i s i l l u s t r a t e d i n F i g . 1 . I n t h i s

p a p e r w e c o n f i n e o u r d i s c u ss io n o f t h e I B p r o c e -

d u r e t o t h e m a x i m u m W T P r e p o r t e d i n t h e f i n a l

I B q u e s t i o n . 4

R e c e n t e m p i r i c al s t u d ie s a l lo w t h e f o r m u l a t i o n

o f a n u m b e r o f h y p o t h e s e s r e g a r d i n g th e e f f e c t s

o f u s in g t h e s e v a r i o u s e l i c it a t i o n m e t h o d s . 5 G i v e n

t h a t r e s p o n d e n t s b e l i e v e i n t h e c r e d i b i l it y o f t h e

h y p o t h e t i c a l m a r k e t p r e s e n t e d t o t h e m ( a n a s s e r -

t i o n w h i c h i s i t s e l f t h e s u b j e c t o f v a l i d i t y a n a l y s is

t h r o u g h o u t t h e p a p e r ) , t h r e e p o t e n t i a l o u t c o m e s

a r e f e a s ib l e g iv e n t h e O E a p p r o a c h :

i. T r u t h - t e l li n g ; t h e r e s p o n d e n t m a y s t a t e

h i s / h e r t ru e m a x im u m W T P .

ii. U n d e r s t a t e m e n t ; t h i s m a y o c c u r fo r d i f f e r i n g

r e a s o n s. I f t h e r e s p o n d e n t f e e l s th a t p e r s o n a l

p a y m e n t s m a y b e l in k e d t o s t a t e d b i ds , b u t

t h a t t h e g o o d i n q u e s t i o n is li k e ly to b e p r o -

v i d e d i r r e s p e c t i v e o f t h is , a r e s p o n d e n t m a y

f r e e - r i d e a n d p r e t e n d t o h a v e le s s i n t e r e s t i n

a g i v e n c o l l e c t i v e a c ti v i t y t h a n h e r e a l l y h a s

( S a m u e l s o n , 1 9 5 4 ) , t h e r e b y g a i n i n g a p u b l i c -

f u n d e d b e n e f i t f o r w h i c h h e / s h e h a s a h i g h e r

t r u e W T P t h a n t h e a m o u n t s t a t e d ( M a r w e l l

a n d A m e s , 1 9 81 ; B r u b a k e r , 1 9 82 ). A l t e r n a -

t i v el y , i f r e s p o n d e n t s f e e l t h a t c o s t s w i l l b e

s h a r e d o n a p e r c a p i t a b a s is , t h e n t h e y w i ll

n o t w is h t o p a y m o r e t h a n t h is a m o u n t a n d

4 A n a l y s i s o f t h e t r i p le b o u n d e d d i c h o t o m o u s c h o i c e r e -

s p o n s e s p r o d u c e d i n t h e I B g a m e i s g i v e n in L a n g f o r d e t a l .

(1994 ) .

5 F o r a r e v i e w s e e M i t c h e l l a n d C a r s o n ( 1 9 8 9) o r B a t e m a n

a n d T u r n e r ( 1 9 9 3 ) .


5/19

L J . B a t e m a n e t a l . / E co l o gi c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9 165

F i n a l B i d

C o n t i n u o u s £

v a r i a b l e )

I N I T I A L B I D 1

e g . £ 1 0 0

D i s c r e t e

v a r i a b l e )

Ye s

W T P

£ 2 0 0 7

J

Ye s

7

W T P

£ 1 0 0 ?

x

N o

\

\

N o

Y e s

J

W T P

£ 5 0 ?

x

N o

x

W T P

£ 4 0 0 ?

J

J

W T P

£ 2 5 ?

\

Y e s ~ M a x i m u m W T P 7

J

4 0 0

\

N o ~ M a x i m u m W T P ?

M a x i m u m W T P ?

- - 2 0 0 -

1 0 0

M a x i m i u m W T P ?

5 0

Y e s - ~ - - ~ ] ~ M a x i m u m W T P ?

2 5

N o ~ M a x i m u m W T P ?

F i g. 1 . T h e i t e ra t i v e b id d i n g I B ) W T P q u e s t i o n f o r m a t , i T h e i n it ia l b id i s g i v e n b y t h e a m o u n t w h i c h t h e r e s p o n d e n t i s a s k e d t o

p a y i n t h e d i c h o t o m o u s c h o i c e f o r m a t . T h i s a m o u n t i s v a r i e d s y s t e m a t ic a l l y a c r o s s th e d i c h o t o m o u s c h o i c e / i t e r a t i v e b i d d i n g

s a m p l e .

w i l l r e s p o n d b y s t a t i n g t h e e x p e c t e d c o s t o f

t h e p r o g r a m i f t h is is b e l o w W T P a n d z e r o

o t h e r w i se . F u r t h e r m o r e , u n f a m i l ia r i ty w i th

O E q u e s t io n s m a y le a d r e s p o n d e n t s t o a d o p t

r i s k - a v e r s e s t r a t e g i e s p l a c i n g d o w n w a r d p r e s -

s u r e u p o n s t a te d W T P . I n t h e ir t h e o r e t ic a l

a n a l y s i s , H o e h n a n d R a n d a l l ( 1 9 8 7 ) a r g u e

t h a t, in a n O E f o r m a t , t h e r e s p o n d e n t s l a ck

o f k n o w l e d g e r e g a r d i n g a g g r e g a t e c o s ts a n d

b e n e f i t s g i v e s n o i n c e n t i v e f o r o v e r s t a t e m e n t

w h i le C V s u rv e y s w h i c h p r o v i d e i m p e r f e c t

i n f o r m a t i o n a n d p l a c e r e s p o n d e n t s u n d e r t i m e

c o n s t r a i n t s ( b o t h f a c t o r s w h i c h a r e a l m o s t i n -

e v i t a b l e t o a t l e a s t s o m e e x t e n t ) a r e l ik e l y t o

r e s u lt in u n d e r s t a t e m e n t o f t r u e W T P . A l l o f

t h e a b o v e s t r a t e g i e s t h e r e f o r e h a v e s o m e b a -

s i s i n e c o n o m i c t h e o r y .

i ii . O v e r s t a t e m e n t ; g i v e n a p o s it i v e p r e f e r e n c e

t o w a r d s p r o v i s i o n o f t h e g o o d i n q u e s t i o n ,

t h e n i f t h e r e s p o n d e n t r e a l i s e s t h a t t h e d e c i -

s io n r e g a r d i n g p r o v is i on d e p e n d s u p o n m e a n

W T P , h e / s h e m a y o v e rs t at e t r u e W T P in a n

e f f o r t t o r ai s e m e a n W T P a n d t h e r e b y im -

p r o v e t h e l i k e l ih o o d o f p r o v i s io n ( B o h m ,

1 9 7 2 ) . S u c h s t r a t e g i c b e h a v i o u r h a s i t s r o o t s

i n p s y ch o l o g ic a l r a t h e r t h a n e c o n o m i c t h e o r y

a n d r e q u i r e s a n a s s u m p t i o n t h a t t h e i n d i v i d -

u a l d o e s n o t b e l i e v e t h a t t h e s t a t e d b i d c o r r e -

s p o n d s d i r e c t ly t o t h e a c t u a l p a y m e n t s .

W h i l e O E f o r m a ts w e r e c o m m o n i n ea r ly C V

w o r k , t h e D C m e t h o d h a s b e c o m e i n c r e a s i n g l y

p o p u l a r i n r e c e n t y e a r s . H o e h n a n d R a n d a l l

( 1 9 8 7 ) p r o v i d e a t h e o r e t i c a l f r a m e w o r k t o s h o w

t h a t , g i v e n a p p r o p r i a t e c o n d i t i o n s ( r e s p o n d e n t s

b e l i e v e t h a t i f p l u r a l i t y f a v o u r s t h e p r o j e c t w i l l

p r o c e e d ; t h a t a p p r o v a l i s c o n d i t i o n a l o n a le v e l o f

i n d i v i d u a l c o s t s p e c i f i e d i n t h e q u e s t i o n ; a n d t h a t

t h e y w i ll p a y t h a t s p e c i f i e d c o s t ) , t h e n a n i n d i v i d -


6/19

166 L J . B a t e m a n e t a l. / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9

u a l ' s o p t i m a l s t r a t e g y i s t r u t h - t e l l i n g w i t h i n a D C

q u e s t i o n n a i r e . F u r t h e r m o r e , K r i s t r 6 m (1 9 90 )

p o i n t s o u t t h a t t h e D C t a k e - i t - o r - le a v e - i t a p -

p r o a c h m o r e a c c u r a t e l y r e f l e c t s a m a r k e t - d e c i -

s io n , th u s h e i g h t e n i n g r e s p o n d e n t f a m i l i a ri t y a n d

a c c u r a c y i n c o m p a r i s o n w i th t h e O E m e t h o d .

E c o n o m i c t h e o r y t h e r e f o r e s u g g e s t s t h a t t h e

D C a p p r o a c h m a y b e s u p e r io r t o th e O E m e t h o d .

H o w e v e r , p s y c h o l og i ca l a r g u m e n t s h a v e b e e n p u t

f o r w a r d t o su g g e s t t h a t t h e i n h e r e n t c h a r a c t e r i s -

t ic s o f t h e D C a p p r o a c h i n d u c e b i a s in t o r e -

s p o n s e s . K a h n e m a n e t al . ( 19 8 2) , a m o n g o t h e r s ,

h a v e a r g u e d t h a t r e s p o n d e n t s f a c e d w it h a n u n f a -

m i l i a r s i t u a t i o n ( p a r t i c u l a r l y w h e r e t h e g o o d i s

a l s o n o t w e l l d e s c r i b e d ) w i l l i n t e r p r e t t h e b i d

l e v e l t o b e i n d i c a t i v e o f t h e t r u e v a l u e o f t h e g o o d

i n q u e s t i o n ( K a h n e m a n a n d T v e r s k y , 1 9 8 2 ;

R o b e r t s e t a l . , 1 9 8 5 ; K a h n e m a n , 1 9 8 6 ; H a r r i s e t

a l ., 1 9 89 ) . H e r e t h e i n t r o d u c t i o n o f a s p e c i f i c b i d

l e v el r a is e s t h e p r o b a b i l i t y o f th e r e s p o n d e n t a c -

c e p t in g t h a t b id . T h i s f r a m i n g o r a n c h o r i n g

e f f e c t m a y a ri s e w h e r e a r e s p o n d e n t h a s n o t

p r e v io u s ly c o n s i d e r e d h i s / h e r W T P f o r a r e -

s o u r c e ( w h i c h i s l i ke l y w i t h r e g a r d t o p u b l i c o r

q u a s i - p u b l i c g o o d s ) a n d / o r i s v e r y u n c l e a r i n

t h e i r o w n m i n d a b o u t t h e i r t r u e v a l u a t i o n . I n

s u c h c a s e s t h e p r o p o s e d b i d l e v e l m a y p r o v i d e t h e

m o s t r e a d i l y a v a i l a b le p o i n t o f r e f e r e n c e o n t o

w h i c h t h e r e s p o n d e n t l a t c h e s . T h e r e i s n o a p r io r i

p r e s u m p t i o n a b o u t t h e d ir e c t i o n o f s u c h a n a n -

c h o r i n g e f f e c t . P o s i t i o n i n g a b i d - v e c t o r s u c h t h a t

i t h a s m o r e b i d l e v e ls o n t h e u p p e r t a il o f th e t r u e

W T P d i s t r i b u t i o n s h o u l d l e a d t o a n c h o r i n g i n -

c r e a s i n g m e a n W T P . C o n v e r s e l y , p o s i t io n i n g t h e

b i d v e c t o r s o a s t o e m p h a s i s e t h e l o w e r t a il o f th e

d i s t r i b u t i o n s h o u l d d e p r e s s m e a n W T P . I n t h i s

e x p e r i m e n t i t w a s d e c i d e d t o s t r u c t u r e a n d p o s i -

t i on t h e b i d v e c t o r i n t h e l i g h t o f i n f o r m a t i o n

f r o m t h e O E p i l o t . 6

A f u r t h e r r e a s o n f o r a n c h o r i n g b e h a v i o u r w a s

f ir s t d e s c r i b e d b y O r n e ( 1 9 6 2 ) w h o p r o p o s e d t h e

e x i st e n ce o f t h e p h e n o m e n o n o f t h e g o o d r e -

s p o n d e n t . H e r e t h e i n t e r v ie w r e l a t i o n s h i p b e -

t w e e n a n a l y s t a n d r e s p o n d e n t is p o r t r a y e d a s a n

i n t e r a c t i v e p r o c e s s i n w h i c h t h e r e s p o n d e n t s e e k s

c l u e s a s t o t h e p u r p o s e o f th e e x p e r i m e n t . I f t h is

p u r p o s e i s i n a d e q u a t e l y c o n v e y e d , w h e t h e r b e -

c a u s e o f p o o r s u r v e y d e s i g n o r i n a d e q u a t e i n t e r-

v i e w e r t ra i n in g , t h e n , O r n e c l a im s , r e s p o n d e n t s

m a y a t t e m p t t o g i ve th e a n a l y st t h o s e a n s w e r s

w h i c h t h e r e s p o n d e n t f e e l s a r e w a n t e d ( i .e . , t r i e s

t o b e g o o d ) . A l t h o u g h g o o d r e s p o n d e n t a n d

r e l a te d p r o b l e m s ( f o r e x a m p l e , y e a - s a y e r s o r

n a y - s a y e r s ) m a y a f f l ic t a l l t h e e l i c i t a t i o n m e t h -

o d s d i s c u s s e d i n t h i s p a p e r , w i t h r e g a r d t o t h e

D C a p p r o a c h , i f t h e i n t e r v i e w e r i s h e ld i n h i g h

e s t e e m b y t h e r e s p o n d e n t , t h e l a t t e r m a y f e e l t h a t

t h e D C b i d l ev e l p r o p o s e d is s o m e h o w c o r r e c t

a n d t h e r e b y r e s p o n d p o s i t i v e ly t o it ( H a r r i s e t a l .,

1 9 89 ) . H o w e v e r , it s h o u l d b e s t r e s s e d t h a t g o o d

r e s p o n d e n t e f f e c ts a r e m o s t g e n e r a l l y c o n f i n e d

t o k n o w l e d g e - b a s e d q u e s t i o n s a n d m a y b e l e ss o f

a p r o b l e m w i th a t t i t u d e o r b e h a v i o u r a l i n t e n t io n

s u r v e y s .

T w o o t h e r p s y c h o l o g i c a l b i a s e s m a y o p e r a t e t o

i n f la t e W T P i f t h e r e s p o n d e n t d o e s n o t f u ll y

b e l i e v e t h e p a y m e n t o b l i g a t i o n . I n c a s e s w h e r e

t h is is o f a m i n o r d e g r e e , s o m e r o u n d i n g - u p o f

b i ds ( f r o m f o r m u l a t e d t o s ta t e d W T P ) m a y o c c u r,

w h i l e i n e x t r e m e c a s e s s t r a t e g i c o v e r b i d d i n g m a y

o c c u r a s d i s c u s s e d a b o v e . C l e a r l y , i f d i s b e l i e f i n

t h e p a y m e n t o b l i g a t io n i s w i d e s p r e a d a n d s e v e r e ,

t h e n t h e f i n d i n g s o f t h e s t u d y w il l b e i n v a li d .

T h e D C a p p r o a c h i s t h e r e f o r e n o t im m u n e

f r o m p o t e n t i a l b i a s p r o b l e m s . G i v e n t h i s s it u a t i o n

a n d t h e p o s s i b l e p r o b l e m s i n h e r e n t i n t h e O E

a p p r o a c h , w e c a n s e e t h a t s i m p l e b i a s t e s t s , s u c h

a s t h e c o m p a r i s o n o f m e a n s d e r i v e d f r o m t h e t w o

f o r m a t s , d o n o t p r o v i d e a v e r y s t r o n g v a l i d i t y t e s t .

N e v e r t h e l e s s i t i s i n t e r e s t i n g t o n o t e t h a t w h i l s t

K e a l y e t a l . ( 1 9 8 8 ) r e p o r t n o s i g n i f i c a n t d i f f e r e n c e

b e t w e e n O E a n d D C m e a n s , m o s t c o m p a r i so n s

( Se l l a r e t a l . , 1 9 8 5 ; W a l s h e t a l . , 1 9 8 9 ; 7 K r i s t r 6 m,

1 99 0 ) r e p o r t D C m e a n s i n e x c e s s o f O E m e a n s ,

a n d n o n e r e p o r t t h e r e v e r s e r e s u lt . T h i s w o u l d

s u g g e s t t h a t e i t h e r t h e s u m t o t a l o f D C b i a s e s

s e rv e s t o i n fl a te W T P ; a n d / o r , t h a t th e O E a p -

6 A related problem m ay occur where respond ents feel that

bid levels are unrealistically low or high, and therefore the

instrument m ay not app ear credible.

7 Wa lsh et al. (1989) adopt a metal-analysis approach based

on a number of studies.


7/19

71

p r o a c h r e s u l t s in a n e t u n d e r e s t i m a t e o f t r u e

W T P .

E x p e c t a t i o n s r e g a r d i n g t h e I B a p p r o a c h a r e, a

p r i o r i , e v e n l e s s c e r t a i n . T h e b i d d i n g p r o c e d u r e i s

b e g u n a t t h e p a r t i c u l a r D C b i d le v e l p r e s e n t e d t o

t h e r e s p o n d e n t i n q u e s t i o n . T h e r e f o r e , i f t h e D C

m e t h o d e x h ib it s a n u p w a r d a n c h o r i n g e f f e c t w e

m i g h t e x p e c t t h a t t h i s i s t o s o m e e x t e n t r e f l e c t e d

i n I B r e s p o n se s . H o w e v e r , t h e I B p r o c e d u r e , p a r -

t i cu l a r ly w i th r e s p e c t t o t h e f i n al m a x i m u m W T P

b i d , i n t r o d u c e s e l e m e n t s o f r e s p o n d e n t c o n t r o l

w h i c h a r e s i m i la r to t h o s e o f t h e O E a p p r o a c h

i .e ., p o s s ib i li t ie s f o r o v e r - o r u n d e r s t a t e m e n t o f

t r u e W T P a r e i n t r o d u c e d .

I n s u m m a r y , w e c a n i d e n t if y a v a r i e t y o f p o s s i-

b l e b i a s e s p o t e n t i a l l y a f f e c t i n g e a c h e l i c i t a t i o n

f o r m a t . T h e p r i m a r y o b j e c t iv e o f th i s s tu d y w a s t o

e x a m i n e t h e d i f f e r e n c e s t h a t a c t u a l ly o c c u r a s a

r e s u l t o f u t i li s i n g t h e s e d i f f e r e n t f o r m a t s .

2 2 T r u n c a t i o n e f f e c t s

A s e c o n d o b j e c t iv e o f t h e s t u d y w a s t o e x a m i n e

t h e i m p a c t o f a l t e r n a t i v e s a m p l e t r u n c a t i o n

s t r at e g ie s u p o n e s t im a t e s o f m e a n W T P a c r o ss

d i f f e r e n t e l i c i ta t i o n m e t h o d s . I n t h e c a s e o f t h e

O E a n d I B ( f in a l b i d) W T P d a t a , t r u n c a ti o n

g e n e r a l l y r e f e r s t o t h e o m i s s i o n o f a c e r t a i n n u m -

b e r o r p e r c e n t a g e o f t h e h i g h e s t b id s . S u c h a

s t r a te g y m a y b e d e f e n s i b le w h e r e a r e s p o n d e n t

s t a t e s a W T P b i d w h i c h i s u n r e a s o n a b l y h i g h

g i v e n t h e i r d i s p o s a b l e i n c o m e . S u c h b e h a v i o u r

m a y o c c u r w h e r e r e s p o n d e n t s e x h ib i t m e n t a l a c -

c o u n t i n g p r o b l e m s ( a n i n a b i l i t y t o r e c o g n i s e t h e i r

m a n y e x i s t i n g , a n d i n f i n i t e l y p o s s i b l e , p u r c h a s e s /

d o n a t i o n s g iv e n t h e i r f i n it e i n c o m e ) , a r e y e a -

s a y e r s , o r a r e p r o n e t o s t ra t e g i c o v e r s t a t e m e n t .

H o w e v e r , s u c h e x c l u s i o n h a s b e e n c r i t i c i s e d b y

s o m e c o m m e n t a t o r s ( S a go f f, 1 9 88 ) w h o c l a im t h a t

s u c h o u t li e rs r e p r e s e n t p r o t e s t b i ds m a d e b y

r e s p o n d e n t s o b j e c t i n g t o t h e v a l u a t i o n p r o c e d u r e

e i t h e r b y r e f u s i n g t o g i v e a n s w e r s o r , a s i n t h i s

c a s e , b y s t a t i n g i n f e a s i b l y h i g h b i d s . W e r e p o r t

t h e e f f e c t s u p o n m e a n O E a n d 113 W T P o f a

v a r i e ty o f t r u n c a t io n o p t i o n s a n d c o m m e n t u p o n

t h e l a t t e r .

W h e n d e a l in g w i th D C d a t a , m e a n W T P is

g i ve n b y t h e e x p e c t e d v a l u e ( E ( W T P ) ) o f th e

a ) L i n e a r l o g i s t i c

_

L J . B a t e m a n e t a L / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9 167

0 B i d l e v e l B m ax

71-o

b ) L o g - l o g i s t i c

l t

0 B i d l e v e l B m ax

Fig. 2. Functional forms for the logistic cumulative probability

distribution curve (source: Langford and Bateman, 1993).

Bmax = maxi mum bid level used in D C stu dy zrn = probability

of a no response.

c u m u l a t i v e p r o b a b i l i t y d i s t r i b u t i o n ( C P D ) c u r v e

l in k i n g t h e p r o b a b i l i t y o f a n o r e s p o n s e (T r ) t o

t h e l e ve l o f t h e b i d . 8 L a n g f o r d a n d B a t e m a n

( 1 9 9 3 ) d i s c u s s i n d e t a i l e s t i m a t i o n o f b o t h l o g i s t ic

a n d l o g -l o g is t ic f u n c t i o n a l f o r m s f o r t h e C P D a n d

t h e s e a r e i l l u s t r a t e d i n F i g . 2 . H e r e w e c o n s i d e r

t h r e e D C t r u n c a t i o n o p t i o n s : 9

s It is equal to the area enclosed by the CPD evaluated with

respect to the bid level holding any other explanatory vari-

ables at their mean values.

9 Furt her uppe r tail truncati on opti ons include the limit of

respondents' relevant (disposable) income, and omission of a

certain percentage of respons es (where yea-saying is sus-

pected).


8/19


9/19

l .J . B a t e m a n e t al . / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9 69

t iv e ly u s e d . I n s h o r t t h e v e h i c l e d i d n o t e n g e n d e r

c r e d i b i l i t y i n t h e h y p o t h e t i c a l m a r k e t a n d w a s

t h e r e f o r e r e j e c te d . T h e F U N D v e h ic l e al so p e r-

f o r m e d b a d l y i n t e r m s o f a h i g h z e r o b i d r a t e

( 2 3 . 1 % ) a n d a l s o p r o d u c e d m u c h h i g h e r b id v ar i -

a t io n t h a n o t h e r v e h ic l es . T h e F U N D v e h i cl e w a s

t h e r e f o r e a l s o r e j e c t e d . T h e T A X v e h i c l e p r o -

d u c e d b y f a r th e l o w e s t z e r o - b i d r a t e ( 1 1 . 8 % ) a n d

a l s o p e r f o r m e d b e t t e r i n t e r m s o f b i d v a r ia b i l it y

t h a n t h e F U N D v e h i c le a n d a b o u t a s w e l l a s t h e

D O N A T E v e h ic l e. I t w a s a ls o s u p p o r t e d b y th e

f a c t t h a t, i f f l o o d d e f e n c e w o r k s w e r e t o b e b u i lt ,

s u c h w o r k s w o u l d i n r e a l i t y b e p a i d f o r o u t o f

t a x e s r a t h e r t h a n t r u s t - f u n d d o n a t i o n s . T h e T A X

v e h i c l e th e r e f o r e h a d t h e a d v a n t a g e s o f r e a l i s m

a n d i m m e d i a t e a p p li c a bi li ty a n d w a s a d o p t e d f o r

t h e m a i n s u r v e y .

A l l r e s p o n d e n t s w e r e a s k e d w h y t h e y h a d r e -

s p o n d e d i n th e w a y t h e y h a d. M a n y o f t h o se

p r e s e n t e d w i th t he F U N D a n d D O N A T E v e hi -

c le s c o m m e n t e d t h a t t h e y w e r e n o t c o n f id e n t t h a t

p a y m e n t s v i a s u c h v e h i c l e s w o u l d b e f u l l y c h a n -

n e l l e d t o w a r d s p r e s e r v a t i o n w o r k ( t r u s t f u n d s

w e r e n o t t o b e t r u s te d ) . F u r t h e r m o r e , m a n y o f

t h o se r e s p o n d i n g t o th e T A X v e h i c le c o m m e n t e d

t h a t , w h i l e t h e y d i s l i k e d p a y i n g e x t r a t a x e s , t h e y

h a d c o n f i d e n c e t h a t s u c h m o n e y w o u l d b e s p e n t

e f f ic i e n tl y u p o n a n y f l o o d d e f e n c e s c h e m e . T h e

d i f f er e n t p a y m e n t v e h ic l e s t h e r e f o r e s e e m t o h a v e

d i f f e r in g p e r c e i v e d p r o b a b i l i t ie s t h a t t h e g o o d

w i l l b e p r o v i d e d ( M i t c h e l l a n d C a r s o n , 1 9 8 9 ) a n d ,

a s e x p e c t e d , a s t hi s p r o b a b i l i t y fa i ls s o d o e s W T P .

T h e m a i n O E s u r ve y w a s b e g u n i n e a r ly A u -

g u s t 1 99 1. H o w e v e r , i t w a s d e c i d e d t o s u s p e n d

t h e s t a r t o f th e p a r a l l e l D C / I B s u r v e y u n t i l s u ff i-

c i e n t O E r e s p o n s e s h a d b e e n c o l l e c t e d u s i n g t h e

f i n a l i s e d q u e s t i o n n a i r e t o p r o v i d e a n a d e q u a t e

b a s i s f o r d e t e r m i n a t i o n o f t h e D C b i d - v e c t o r . I f

t h e r e w a s n o e l i c i t a t i o n e f f e c t r e l a t e d t o c h a n g i n g

f r o m t h e O E t o t h e D C a p p r o a c h , t h e n a n y

r e s p o n d e n t s t a ti n g a p a r t ic u l a r m a x i m u m W T P o f

£ X i n a n O E s u r v e y w o u l d l o g ic a l ly h a v e r e -

s p o n d e d n e g a ti v e ly t o a D C W T P q u e s t io n w i t h a

b i d l e v e l h i g h e r t h a n £ X . I n s u c h a s i t u a t i o n t h e

p r o b a b i l i t y o f a c c e p t i n g v a r i o u s D C b i d l e v e ls c a n

b e p r e d i c t e d o n t h e b a s i s o f O E d a t a . I f a s u b s e -

q u e n t a c t u a l D C e x p e r i m e n t y ie l d s r e s u l ts w h i c h

a r e s i g n i f i c a n t l y d i f f e r e n t f r o m t h i s p r e d i c t i o n ,

t h e n , g i v e n t h a t w e h a v e n o t i n c u r r e d a n y s a m -

p i i n g b i a s , s u c h a d i f f e r e n c e i s i n d i c a t i v e o f s o m e

b i a s in o n e o r b o t h o f t h e e l i c it a t io n m e t h o d s . D C

b i d l e v e l s w e r e e v e n t u a l l y s e t o n t h e b a s i s o f t h e

f i r s t 4 2 7 O E r e s p o n s e s c o l l e c t e d . A s w a s e x -

p e c t e d , t h e a c t u a l O E b i d s r e c e i v e d w e r e n o t

s m o o t h l y n o r n o r m a l l y d i st r i b u te d , b u t g r o u p e d

a r o u n d c e r t a i n c a t e g o r y v a l u e s w i t h a s i g n if i c an t

p o s i t i v e s k e w . G i v e n t h i s , it w a s d e c i d e d t o f ix t h e

D C b i d l e v e l s i n t h e f o l l o w i n g w a y :

i. T h e u s e o f t ec h n i c a l ly p r e c i s e a m o u n t s s u c h

a s £ 3 , £ 7 , £ 1 2 , e t c . w a s c o n s i d e r e d l i k e l y t o

c a u s e u n c e r t a i n t y a n d c o n f u s i o n a m o n g s t r e -

s p o n d e n t s . C a t e g o r y v a l u e s s u c h a s £ 5, £ 10 ,

£ 2 0 , e t c . w e r e c o n s i d e r e d t o b e t h o s e m o s t

r e a d i l y a c c e p t a b l e a n d r e l e v a n t t o r e s p o n -

d e n t s .

ii. I n o r d e r t o a i d a c c u r a t e p o s i t i o n i n g o f e x -

t r e m i t i e s o n t h e c u m u l a t i v e p r o b a b i l i t y d i s t r i -

b u t i o n c u r v e , t h e l o w e r D C b i d w a s c h o s e n s o

a s t o b e a l m o s t u n i v e r s a l l y a c c e p t a b l e . G i v e n

c o n s t r a i n t ( i ) , t h i s w a s f i x e d a t £ 1 .

i ii. S i m i l a r ly , t h e u p p e r b i d l e v e l w a s c h o s e n s o a s

t o b e a l m o s t u n i v e r s a l l y r e j e c t e d . B a s e d u p o n

i n i t i a l O E r e s p o n s e s , t h i s w a s f i x e d a t £ 5 0 0 .

iv . T h e n u m b e r o f b id l e v e l c a t e g o r i e s w a s i n fl u -

e n c e d b y t h e f o l l o w i n g c r i te r i a :

a . E x p e c t e d s a m p l e s i z e ; t h i s s h o u l d n o t o n l y

p e r m i t a n a l y s i s a c r o s s b i d l e v e l s , b u t a l s o b e

d i v i d e d b e t w e e n b i d l e v e l s s u c h t h a t r o b u s t

w i t h i n - b i d l e v e l a n a l y s i s i s f e a s i b l e .

b . T h e n u m b e r o f b id l e v e ls a n d t h e i r p o s i -

t i o n in g s h o u l d e n h a n c e r o b u s t a n a l y s is o f t h e

c u m u l a t i v e p r o b a b i l i ty d i s t r ib u t i o n c u r v e .

G i v e n t h a t a p a r a m e t r i c e s t i m a t o r i s t o b e

u s e d , t h e r e is a c le a r t r a d e o f f b e t w e e n t h e n u m -

b e r o f b i d a m o u n t s t o b e c h o s e n a n d t h e r e s u l t in g

p r e c i s i o n o f t h e e s t i m a t e s t o b e o b t a i n e d . I n t h e

e v e n t , g i v e n t h e a b o v e c r i t e r i a , e i g h t b i d l e v e l s

w e r e c h o s e n ( d i s t r i b u t e d s o a s t o r e f l e c t t h e o b -

s e r v e d p o s i t i v e s k e w ) : £ 1 , £ 5 , £ 1 0 , £ 2 0 , £ 5 0 , £ 1 0 0 ,

£ 2 0 0 a n d £ 5 0 0 .

4 F a c t o r s e n h a n c i n g s t u d y v a l i d it y

G i v e n t h e o n g o i n g n a t u r e a n d t o n e o f th e

a c a d e m i c d e b a t e r e g a r d i n g t h e C V M , w e c l a i m


10/19


o n l y to h a v e a d d r e s s e d c e r t a i n l i m i t e d i s s u e s u s -

i n g a la r g e s a m p l e a n d a p o l i c y - r e l e v a n t e n v i r o n -

m e n t a l i ss u e. W e h a v e a t t e m p t e d t o m i n im i s e

b i a s w h e r e v e r p o s s i b l e r e c o g n i s i n g t h a t m i n i m i s a -

t i o n i s n o t t h e s a m e a s r e d u c t i o n t o i n s i g n i f i-

c a n c e . H o w e v e r , t h e s t u d y d o e s c o n f o r m t o th e

m a i n g u i d e l i n e s o f t h e b l u e r i b b o n p a n e l ' s t e s t i n g

p r o t o c o l , a n d w e w o u l d h i g h l i g h t s e v e r a l fa c t o r s

w h i c h d o a p p e a r t o e n h a n c e t h e r e l a t i v e v a l i d i ty

o f th i s p a r t i c u l a r a p p l i c a t i o n .

R e s p o n d e n t s a r e l i k e ly t o h av e p o s s e s s e d v e r y

h i g h p r i o r i n f o r m a t i o n l e v el s r e g a r d i n g t h e r e -

s o u r c e . W h i l s t o n l y 1 6 % w e r e l o c a l r e s i d e n t s ( o r

w e r e w o r k i n g i n t h e a r e a ) t h e v a s t m a j o r i t y o f

v i s i to r s w e r e o n a r e p e a t t r ip ( 7 2 % ) . F u r t h e r -

m o r e , t h e m a j o r i t y o f v i s i ts w e r e h o l i d a y s r a t h e r

t h a n d a y tr ip s , i n d i c a t i n g t h a t r e s p o n d e n t s u n d e r -

s t o o d t h e n a t u r e o f t h e g o o d u n d e r i n v e s t ig a t i o n .

E x t e n s i v e p i l o t i n g p r e c e d e d a l a r g e s a m p l e

m a i n s u r v ey . A l t h o u g h a d e q u a t e s a m p l e s iz e i s a

4

n e c e s s a r y f a c t o r f o r a n y v a l i d s o c ia l su r v e y ,

C V M s t u d ie s in t he U K t o d a t e h a v e b e e n c h a r -

a c t e r i s e d b y s m a l l s a m p l e s iz e . t5 I n d e e d , t o o u r

k n o w l e d g e , t h i s s tu d y c o n s t i t u t e s t h e l a r g e s t o f it s

k i n d c a r r i e d o u t i n E u r o p e t o d a t e .

I t m a y b e t h a t t h e c h a r a c t e r o f t h e a r e a i t se l f

l e d to a m i n i m i s a t i o n o f t h e e m b e d d i n g p r o b l e m s

h i g h l i g h t e d b y K a h n e m a n a n d K n e t s c h (1 9 92 ).

T h e N o r f o l k B r o a d s i s i n m a n y w a y s a u n i q u e

r e s o u r c e . I ts l a n d s c a p e , e c o l o g y a n d m a n y o f i ts

r e c r e a t i o n a l f a c i l i t i e s h a v e n o a d e q u a t e n a t i o n a l

s u b s t i t u t e . T h i s m e a n s t h a t t h e c o n f u s i o n o f p a r t

a n d w h o l e d e s c r i b e d b y K a h n e m a n a n d K n e t s c h

i s l e s s l i k e l y t o b e a p r o b l e m ; i n e f f e c t t h e p a r t

6

a n d t h e w h o l e a r e o n e .

F i n a l l y w e b e l i e v e t h a t t h e s c e n a r i o p r e s e n t e d

t o r e s p o n d e n t s w a s e a s il y u n d e r s t o o d a n d h i gh l y

14 See discussion in M itchell and Carso n (1989).

15 Fo r a review of UK studies, see T urn er e t al. (1992).

16 A related aspect of this p roblem, the inabil i ty of respon-

dents to recognise other competing demands upon a f ini te

r ec r ea t iona l /envi r onm enta l budge t , w as addr es sed by ask ing

respond ents to calculate this budget and take i t into consider -

at ion when determinin g WTP. In bo th the OE and IB exper i-

ment WTP was approximately 16% of the budget , an amount

which appears reasonable (al though we admit that this does

not cons t i tu te incont r over t ib le pr oof tha t no embedding pr ob-

lem exists).

b e l i e v a b l e . T h e l o w - l y i n g n a t u r e o f t h e a r e a , i t s

p r o x i m i t y to t h e s e a a n d t h e r e a d i l y o b s e r v a b l e

d i l a p i d a t i o n o f th e e x i s t in g f l o o d d e f e n c e s m a k e

t h e p o s s i b i l i t y o f f l o o d i n g a p p e a r r e a li s ti c . T h e

f e a s i b i l i t y o f a t e c h n i c a l s o l u t i o n t o s u c h a p r o b -

l e m i s a l s o h i g h s in c e t h e p r e v a i l i n g c h a r a c t e r o f

t h e a r e a i s d u e t o e x i s ti n g f l o o d d e f e n c e s . F u r -

t h e r m o r e , i n th e U K c o n t e x t , t h e o n l y r e a l is t i c

a g e n c y fo r s uc h a n u n d e r t a k i n g w o u l d b e o n e

w h i c h w a s c e n t r a l l y f u n d e d f r o m t a x e s . W e b e -

l ie v e t h a t t h e s e f a c t o r s c o m b i n e t o c o n s i d e r a b l y

e n h a n c e t h e c r e d i b i l it y ( a n d t h e r e f o r e r e l a t i v e

v a l i d i t y ) o f t h i s s t u d y .

5 T h e O E e x p e r i m e n t : R e s u l t s a n d d i s c u s s i o n

I n b o t h t h e O E a n d D C / I B s u rv e y s , r e s p o n -

d e n t s w e r e a s k e d , p r i o r to th e W T P q u e s t i o n ,

w h e t h e r t h e y w o u l d b e i n f a v o u r o f i n c r e a s e d

p e r s o n a l t a x a t i o n i n o r d e r t o p r e s e r v e t h e B r o a d s .

T h e m a i n o b j e c t i v e o f su c h a q u e s t i o n w a s t o

v a l i d a t e a z e r o W T P r e s p o n s e . I t w a s r e c o g n i s e d

t h a t i f t h is w a s o m i t t e d f r o m t h e q u e s t i o n n a i r e

t h e n a s k i n g p e o p l e d i r e c t l y t o s t a t e a W T P s u m

m a y m a k e r e s p o n d e n t s f e el o b l ig e d t o s t a te s o m e

n o n - z e r o a m o u n t . 17 F o r t h e O E s a m p l e , f a c t o rs

s u c h a s t h e r e s p o n d e n t s i n c o m e ; a g e ; v is i to r t y p e

( o n h o l i d a y , d a y t r i p p e r , r e s i d e n t , w o r k e r ) ; i n t e r -

e s t in b o a t i n g ; f i rs t t i m e / r e p e a t v i s i to r , e t c ., w e r e

a l l s h o w n t o b e i n s i g n if i c a n t i n d e t e r m i n i n g a n -

s w e r s t o t h is w i l l / w o n ' t p a y q u e s t i o n . H o w -

e v e r , t w o f a c t o r s w e r e s i g n i f i c a n t p r e d i c t o r s ( a t

t h e 9 9 % c o n f i d e n c e l e v e l) o f a r e s p o n d e n t a g r e e -

i n g t o p a y n a m e l y : ( i ) w h e r e t h e r e s p o n d e n t i d e n -

t i f i e d r e l a x i n g / e n j o y i n g s c e n e r y a s t h e m a i n

r e a s o n f o r t h e v is i t a n d ; ( i i) w h e r e t h e r e s p o n d e n t

w a s a m e m b e r o f an e n v i r o n m e n t a l g r o u p .

I n t o t a l 86 2 i n te r v i e w s w e r e c o m p l e t e d u s i n g

t h e O E e l i c i ta t i o n m e t h o d . O f t h e s e s o m e 1 3 1

17 However , some respo ndents with a low but non -zero WTP

may reply negatively to the W TP anything at a l l? question

if they feel that their t rue WTP is well below the level

required for provision. Such respondents will consequently be

treated as a spike at zero, but such an approach conforms to

the N O A A pane l ' s r ecommenda t ions 6 and 12 r epor ted a t the

s tar t of this paper .


11/19

L J . B a t e m a n e t al . / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9

Table 1

Truncation effects - open-en ded WTP study

171

No. of up pe r 0 1 8 42 84 126 168 211

tail truncated

of upp er tail 0 0.1 1 5 10 15 20 25

truncated

N 846 b 845 838 804 762 720 678 635

Mean WTP c 67.19 65.79 60.89 46.76 37.38 32.57 28.39 25.54

Med ian WTP 30.00 30.00 30.00 25.00 25.00 20.00 20.00 12.00

St. dev. 113.58 106.10 90.08 55.19 38.64 33.69 30.10 24.41

S.E. me an 3.91 3.65 3.11 1.95 1.40 1.26 1.16 0.97

Maximum bid d 1250.00 1000.00 500.00 250.00 150.00 100.00 100.00 100.00

Lower qua rti le 5.00 5.00 5.00 5.00 5.00 2.13 2.00 1.00

Up pe r qua rti le 100.00 100.00 100.00 60.00 50.00 50.00 50.00 50.00

a All rows, except the upper three, are measured in £.

b Total sampl e of 862 interviews included 16 incompleted question naires (omitted fr om calculation o f mean).

c Includes, as zeros, those who refused to pay anything at all.

d Minimum bid = zero throughout.

r e s p o n d e n ts a n s w e r e d n o t o t he w i l l / w o n ' t

p a y q u e st i o n . A ll s u c h r e s p o n d e n t s w e r e t h e n

a s k e d t o s t a t e w h y t h e y h a d g i v e n s u c h a n a n s w e r .

T h e m o s t c o m m o n r e a so n s f o r n o n - p a y m e n t w a s

r e l a t e d t o i n c o m e a n d e x i s t in g c o m m i t m e n t s ( a l -

m o s t 4 0 % o f n o n - p a y e r s , e q u i v a l e n t t o 6 % o f t h e

t o ta l O E s a m p l e ) f o l lo w e d b y th e p u r e f r e e - r i d e r

r e p l y t h a t , a l t h o u g h t h e a r e a w a s v a lu e d , s o m e -

o n e e l se ( e. g. , th e g o v e r n m e n t ) s h o u l d p a y ( a l-

m o s t 2 5 % o f n o n - p a y e r s , e q u i v a l e n t t o 4 % o f t h e

t o t a l O E s a m p l e ) . W h i l s t i n c o m e c o n s t r a i n t s p o s e

n o p r o b l e m h e r e , t h e f r e e r i d i n g e f f e c t d o e s p o i n t

t o a p o s s i b l e d o w n w a r d b i a s i n t h e O E e s t i m a t e

o f W T P . M o r e i m p o r t a n t l y th is s m a ll g r o u p o f

e x t r e m e f r e e - r i d e r s m a y i n d i c a t e t h e e x i s t e n c e o f

a l a r g e r g r o u p o f r e s p o n d e n t s w h o , w h i l s t s t i l l

s t a t i n g s o m e n o n - z e r o s u m , n e v e r t h e l e s s r e d u c e d

t h e i r s t a t e d W T P b e l o w t r u e W T P a s a r e s u l t o f

t h e f r e e - r i d e r i n c e n t i v e . H o w e v e r , a t t e m p t s t o

q u a n t i f y s u c h a s t ra t e g y w o u l d h a v e r e q u i r e d a

s i g n i f i c a n t e x t e n s i o n t o t h e q u e s t i o n n a i r e ( a n d

p o s s i b l y l a b o r a t o r y - t y p e c o n t r o l s ) a n d w e r e c o n -

s e q u e n t l y n o t u n d e r t a k e n . 1 8

18 It is interesti ng to note that recent reviews have indicated

that free-riding behaviour may result in a reduction of stated

WTP to (very approximately) between 60-95 of true WTP,

depending upon the strength of the incentive to free ride. See

chapters 6 and 7 of Mitchell and Carson (1989) and Milon

(1989).

E v i d e n c e o f p r o t e s t b i d d i n g , in t h e s e n s e o f

a r e f u s a l t o p a r t i c i p a t e i n t h e v a l u a t i o n p r o c e s s ,

w a s c o n s p i c u o u s l y a b s e n t . T h e p o s s ib i li ty o f s u c h

a r e s p o n s e w a s d i r e c t l y c a t e r e d f o r b y l is t in g a

r e f u s a l t o v a lu e t h e B r o a d s a s a n e x p l ic i t o p t i o n

a m o n g s t r e a s o n s f o r r e f u s i n g t o p a y . H o w e v e r ,

o n ly 30 r e s p o n d e n t s ( 1 % o f t h e t o ta l O E +

D C / I B s a m p l e ) g a v e t hi s a s t h e ir r e a s o n f o r

r e f u s a l . T h i s f in d i n g s t r o n g l y c o n t r a d i c t s t h e a s -

s e r ti o n b y s o m e c o m m e n t a t o r s t h a t C V M s t ud i e s

a r e p e r v a s i v e l y i n v a l i d a t e d b y th e p r e v a l e n c e o f

p r o t e s t b i d s ( S a g o f f , 1 9 8 8 ) .

A l o n g s i d e e v i d e n c e o f f r e e - ri d i n g , o t h e r r e -

s p o n d e n t s i n t h e O E s a m p l e a p p e a r e d t o ex h ib it

s t r a t e g ic o v e r b i d d i n g . T a b l e 1 d e t a i ls u n i v a r i a t e

O E W T P s t at is t ic s f o r a v a r i e t y o f u p p e r t a il

t r u n c a ti o n p o i n ts . M e a n W T P f o r t h e e n t ir e O E

s a m p l e o f 8 4 6 r e s p o n d e n t s w a s £ 6 7 . 1 9 ( 9 5 % C I =

£ 5 9 . 5 3 -£ 7 4 . 8 6 ). H o w e v e r , o m i s s i o n o f j u s t t h e

s in g l e h i g h e s t b id ( 0 . 11 % o f t h e O E s a m p l e )

c a u s e d O E m e a n W T P t o f a l l t o £ 6 5 . 7 9 ( a r e d u c -

t io n o f o v e r 2 % ) . S i m i la r ly , tr u n c a t i n g t h e t o p 1 %

o f b i d s c a u s e s a r e d u c t i o n i n t h e m e a n o f n e a r l y

1 0 % . I n t h e m s e l v e s s u c h s t a t i s t i c a l e f f e c t s a r e n o t

c o n c l u s i v e p r o o f o f s t r a t e g i c o v e r b i d d i n g a s a

s k e w e d d i s t r ib u t i o n m a y s i m p l y r e f l e c t th e s o c i o e -

c o n o m i c a n d p r e f e r e n c e c h a r a c t e r i s t i c s o f t h e

s a m p l e . H o w e v e r , u p o n i n s p e c t i o n it w a s f o u n d

t h a t t h e s u m s s t a t e d b y t h o s e a t t h e u p p e r t a i l o f

t h e b i d d i s tr i b u t io n a p p e a r e d i n f e a s i b le g i v e n t h e


12/19

172 L J . B a t e m a n e t a l . / E c o lo g i ca l E c o n o m i c s 1 2 1 9 9 5) 1 6 1 - 1 7 9

ability of these respondents to pay. Several of the

highest bidders stated WTP sums which exceeded

their entire annual expenditure upon all recre-

ational and environmental goods (in some cases

by a factor of 5). We therefore conclude that

there is strong evidence for a degree of strategic

overstatement by a small number of respondents

in the OE experiment.

Validity testing was applied to all three elicita-

tion methods following the criteria set out by

Mitchell and Carson (1989). Content validity was,

in the main, carried out prior to the survey and

consisted of a number of meetings with recog-

nised authorities in the fields of economics, mar-

keting, social surveys and psychology. These con-

sultancies addressed all aspects of the study with

particular emphasis on the design of the ques-

tionnaire, associated information and survey sam-

piing strategy. Criterion validity testing (compari-

son with actual WTP for the good) was not feasi-

ble and therefore a major effort was made to

establish construct validity (i.e., testing whether

results conformed to expectations). One simple

approach, comparing mean WTP with that of

other studies (convergent validity), was only feasi-

ble for the OE study as other formats have had

few applications in the UK to date. Results from

the OE experiment were contrasted with those

from 28 compa rab le U K use-value studies. 19 This

analysis showed results to be logically related

according to two factors:

i. the number of adequate substitute sites avail-

able;

ii. the magni tude of the proposed change in pro-

vision.

Most other UK studies have looked at sites

with some or many substitutes, facing relatively

marginal changes in provision. Accordingly, the

fact that this study estimates a mean WTP value

higher than most others seems logically correct.

The theoretical validity of OE responses was

examined via estimation of the bid function. A

full range of explanatory variables was investi-

gated. Functional form was a priori uncertain

19 Full results are given in Bateman et al. (1994).

(although linear forms were theoretically undesir-

able), but an initial analysis indicated that a high

degree of overall explanation was unlikely to be

achieved (a characteristic of OE studies). There-

fore detailed (e.g., Box-Cox) analysis of func-

tional form was by-passed in favour of using

standard forms. The best model was provided by

a double log form which is reported in Eq. 1. This

model narrowly outperformed a semi-log (de-

pendent) form which contained the same ex-

planato ry variables.

LWTP(OE) = 0.1934 + 0.2920 LINC

(0.22) (3.32)

+ 0.2695 RE LA X + 0.2473 EN V

(4.15) (3.93)

1 )

where: LWTP( OE) = Natural log of open-en ded

WTP response; LIN C = Natural log of respon-

dents income (continuous variable); R EL AX = 1

if respondent often visits area to relax/enjoy

scenery (= 0 otherwise); ENV = 1 if respo ndent

is a membe r of an environmenta l gro up (= 0

otherwi se). R 2 = 5.29%; tota l d.f. = 800. 20 Fig-

ures in brackets are t statistics.

The explanatory variables given in Eq. 1 are all

significant at the 99% level, while no further

variables were significant at even the 95% level.

The major feature of this best model is its very

21

poor overall degree of explanatory power,

which although more extreme than usual in this

case, is a characteristic trait of many OE studies.

Therefore, while the logical ordering of mean

responses observed across studies indicates that

economic theory is adequate to explain results at

such a level, the poor performance of the model

given in Eq. 1 suggests that further consideration

of the motivations underlying individual re-

sponses is required here (see below).

20 Eq. 1 omits all responses for which information on any

explanatory variable was missing.

21 To ensure that no errors had been made, statistical analy-

sis was carried out independently at the University of East

Anglia and at the University of Newcastle-upon-Tyne. Both

analyses confirm the weak explanatory power of the best

model.


13/19

l .J . B a t e m a n e t a l. / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9 1 7 3

6 T h e D C e x p e r i m e n t : R e s u l t s a n d d i s c u s s i o n

A s w i t h t h e O E s u rv e y , t h o s e i n t e r v i e w e d u s -

i ng t h e D C / I B q u e s t i o n n a ir e w e r e a s k e d , p r i o r

t o th e W T P q u e s ti o n s, w h e t h e r o r n o t t h ey w e r e

w i l l i n g t o p a y a n y e x t r a t a x e s . I n t o t a l 2 4 0 o f t h e

2 07 0 D C / I B r e s p o n d e n t s a n s w e r e d n o t o t hi s

q u e s t i o n ( 1 1 . 6 % ) . T e s t s s h o w e d t h e r e t o b e o n ly

o n e s i g n i f i c a n t p r e d i c t o r o f a p o s i t i v e r e s p o n s e t o

t h is q u e s ti o n , n a m e l y , m e m b e r s h i p o f a n e n v i ro n -

m e n t a l g r o u p . 22 A l l r e s p o n d e n t s w h o r e f u s e d t o

p a y a n y e x t r a t a x e s w e r e a s k e d t o s p e c if y a r e a s o n

w h y . A s b e f o r e , t h e m o s t c o m m o n r e a s o n s i n -

v o l v e d i n c o m e c o n s t r a i n t s a n d e x i s t i n g c o m m i t -

m e n t s ( 3 3 % o f n o n - p a y e r s ; 3 . 9 % o f t h e t o t a l

s a m p l e ) c l o s e l y f o l l o w e d b y t h e p u r e f r e e - r i d i n g

r e s p o n s e ( 3 1 . 7 % o f n o n - p a y e r s ; 3 . 7 % o f t h e t o t a l

s a m p l e ) . 23 A n a l y s i s f a i l e d t o r e v e a l a n y s i gn i fi -

c a n t f a c t o r s d e t e r m i n i n g t h e r e a s o n f o r n o n - p a y -

m e n t .

T h o s e r e s p o n d e n t s w h o i n d i c a t e d t h a t t h e y

w e r e p r e p a r e d t o p a y a t l e a st s o m e a m o u n t w e r e

t h e n a s k e d t o p a y o n e o f t h e b i d l e v e ls , se l e c t e d

a t r a n d o m . T h e m e a n D C W T P is c a l c u la t e d by

i n t e g r a t i n g t h e C P D f u n c t i o n b e t w e e n a p p r o p r i -

a t e t r u n c a t i o n l im i ts . A c c u r a t e e s t i m a t i o n o f th e

b i d f u n c t i o n i s t h e r e f o r e v i t a l b e c a u s e a n i n c o r -

r e c t l y f i t t e d f u n c t i o n w i l l g i v e a s p u r i o u s e s t i m a t e

o f t h e m e a n . B o t h l i n e a r a n d l o g m o d e l s w e r e

t e s t e d u s i n g b o t h l o g i t a n d p r o b i t l i n k f u n c t i o n s .

L o g m o d e l s g a v e a m a r k e d l y b e t t e r f i t t h a n l i n e a r

s p e c i f i c a t i o n s . T h e c h o i c e b e t w e e n l i n k f u n c t i o n s

w a s m o r e d i f fi c u lt a s b o t h l o g it a n d p r o b i t a p -

p r o a c h e s p e r f o r m e d s i m i la r l y w e l l. 24 H o w e v e r , a

l o g -l o g is t ic m o d e l g a v e a m a r g i n a l l y b e t t e r f it a n d

a s th i s h a s b e e n u s e d e x t e n s iv e l y e l s e w h e r e , i t

w a s p r e f e r r e d f o r f u r t h e r a n a ly s is . I n a ll c a se s t h e

m o s t r e m a r k a b l e f e a t u r e o f t h e e s t im a t e d m o d e l s

w a s t h e v e r y h ig h e x p l a n a t o r y p o w e r o f t h e b i d

l e v e l i n d e t e r m i n i n g W T P r e s p o n s e . E q . 2 p r e -

2 2 S i g n i f i c a n t a t a = 1 % . N o o t h e r s i g n i f i c a n t f a c t o r s a t

a = 5 % .

23 N o t e t h a t a s t h i s q u e s t i o n w a s a s k e d p r i o r t o a n y W T P

q u e s t i o n , t h i s r e s p o n s e d o e s n o t r e f u t e t h e e a r l i e r s u g g e s t i o n

t h a t D C f o r m a t s m a y i n h i b i t f r e e -r i d i n g .

2 4 F u l l d e t a i l s i n B a t e m a n e t a l . ( 19 9 3 ) .

s e n t s t h e l o g - l o g i s ti c m o d e l r e s u l t i n g f r o m t h e

s in g l e e x p l a n a t o r y v a r i a b l e L B I D ; t h e n a t u r a l l o g -

a r i t h m o f t h e b i d l ev e l ( £ ) p r e s e n t e d t o r e s p o n -

d e n t s .

L O G I T ( ~ ' i) = - 4 . 9 3 2 + 0 .9 93 9 L B I D ( 2 )

( - 19 . 74 ) ( 18 . 39 )

D e v i a n c e c h a n g e = - 5 9 4 . 4 ; r e s id u a l d e v i a n c e =

1 3 2 5 .7 ; d . f. = 1 6 2 4. F i g u r e s i n b r a c k e t s a r e t v a l -

u e s .

W h e r e :

L O G I T ~-i = l n [ ~ ]

/'1 i p r o b a b i l i t y o f a n i n d i v i d u a l s a y i n g n o t o

the b id l eve l . 25

A s c a n b e s e e n f r o m E q . 2 , a lo g - lo g i st ic m o d e l

w i t h t h e s i n g l e e x p l a n a t o r y v a r i a b l e L B I D f it s t h e

d i c h o t o m o u s c h o i c e d a t a s e t e x t r e m e l y w e l l. 26

F u r t h e r e x p l a n a t o ry v a r i a b le s w e r e t h e n a d d e d t o

t h i s m o d e l i n a n a t t e m p t t o i m p r o v e t h e f it . 27

T h e b e s t l o g - l o g is t i c m o d e l i s g iv e n a s E q . 3 .

L O G I T ( ~ ' i )

= - 3 . 7 3 6 + 1 .0 26 L B I D - 0 .0 9 07 L I N C

( - 6 . 23 ) ( 18 . 4 0 ) ( - 1 . 34 )

- 0 . 5 8 8 8 B O A T - 0 . 3 7 5 6 R E L A X

( - 3 . 35 ) ( - 2 . 58 )

- 0 . 3 1 2 6 E N V ( 3 )

( - 2 . 22 )

D e v i a n c e c h a n g e = - 6 2 2 . 9 ; r e s i d u a l d e v i a n c e =

1 2 9 7 .2 ; d . f . = 1 6 2 0 . F i g u r e s i n b r a c k e t s a r e t v a l -

u e s .

25 R e a d e r s s h o u l d b e a w a r e t h a t th i s m e a n s t h a t p o s i t i v e

r e l a t i o n s h i p s (e .g . b e t w e e n W T P a n d i n c o m e , e t c. ) w i l l h a v e a

n e g a t i v e s i g n a n d v i c e v e r s a .

26 A s a n a n c i l l a r y t e s t o f t h is r e s u l t , i n d i v i d u a l m o d e l s w e r e

f i t t e d f o r t h e d a t a w i t h i n e a c h b i d l e v e l ( 2 1 4 ~< n ~< 2 2 7 f o r

e a c h l e v e l) . A l l o f t h e e i g h t m o d e l s p r o d u c e d w e r e e x c e p t i o n -

a l l y w e a k . T h i s i s i n e v i t a b l e f o r t h e l o w e r b i d l e v e l s w h e r e v e r y

f e w r e s p o n d e n t s r e g i s t e r e d r e f u s a l s i .e ., v e r y l i t t le v a r i a t i o n .

H o w e v e r e v e n t h e b e s t o f t h e s e m o d e l s ( fo r t h e £ 5 0 b id l e v e l )

o n l y r e c o r d e d a c h a n g e i n d e v i a n c e o f - 2 4 . 6 5 w i t h re s i d u a l

d e v i a n c e b e i n g 2 2 3 .7 3 . T h e s e r e s u l t s c o n f ir m t h e k e y r o l e o f

t h

b i d l e v e l in d e t e r m i n i n g r e s p o n s e s .

27 A l t e r n a t i v e m o d e l s a r e c o n s i d e r e d i n B a t e m a n e t a l .

( 1 9 9 3 ) .


14/19


Table 2

Mean WTP estimates a: log-logistic models (£/annum)

Truncation Single variable: Full model:

option Eq. 2 Eq. 3

C * * 112 (68-168) 111

C* * * 144 (75-261) 140

a Figures in brackets represent 95% confidence intervals

around the mean (not calculated for full models). Full details

of all models are given in Bateman et al. (1993). Truncation

options as specified previously.

Where

LINC = Natura l logar i thm of respondents house-

hold income ( conti nuous variable); BOA T = 1 if

respondent does par t ic ipa te in some boat ing ac-

t ivi ty (= 0 otherwise); RE LA X = 1 if res pond ent

visi ts area to r ela x/e njo y scenery often (= 0 oth-

erwise); ENV = 1 if resp ond ent is a mem be r of

an envi ronm enta l group ( = 0 otherwise) ; o ther

variables as previously defined.

Alt houg h not s ignif icant at a = 5%, the vari-

able LINC is inclu ded in Eq. 3 to underl ine the

finding that , a l though complying with expecta-

t ions, the resp onde nts in come plays a very weak

(stat is t ical ly insignif icant) part in d eter mini ng re-

sponse to dichotomous choice WTP quest ions.

While economic theory would lead us to expect

the pric e variable (LBID) to be the most s ignif-

icant , i ts degree of dominance over other vari-

ables, part ic ularly income, is of interest . We com-

men t on these f indings subsequently.

Table 2 presents mean WTP ca lcula ted for

both single variable and best f i t versions of the

log-logistic models. 28 Me ans are r epor ted for the

C * * and C * * * tru nca tio n opti ons discussed in

Secti on 2 of this paper. C * and C * * * are essen-

tially the s ame for the log-logistic model, and so

C* has bee n omitted from these results (see

Langford and Bateman (1993) for further detai ls) .

95% co nfidenc e intervals were ge nera ted by a

Mon te Carlo simulat ion of the bivariate norm al

distr ibuti on of the i ntercept and slope (a and b)

of the regression equation (Langford and Bate-

man , 1993). For a discussion of estimati ng vari-

ance of WTP around the poin t es t imate of mean

or median, see Duffield and Patterson (1991),

and Langford (1994).

Table 2 shows that means for each ful l model

are very similar to those for corresponding single

variable models, indicat ing that e xplanatory vari-

ables other than bid level have relatively little

influen ce upon the mean. However, choice of

truncation points clearly does have an impact

upon es t imates of the mean. Whi le the upper

tr un ca ti on poi nt is oo for C * * * (an d C * ), it is set

equi vale nt to the up per bid level for C * * and can

therefore vary across studies i f different maxi-

mum bid levels are used. The impact of changing

the max imum bid level was invest igated by com-

paring est im ates of C* * and C* * * based upo n

Eq. 2 and calculated across the whole dichoto-

mous choice sample, to those calculated when

respondents answering the £500 bid level ques-

t ion were omitted ( i.e. , changing the ma ximu m

bid level and C * * tru nca tio n point to £200), and

again when respondents answering the £200 bid

level quest ion were omitted ( i .e . , maximum bid

level = C * * trun cat ion poin t = £100). Resul ts are

given in Table 3 below.

As can be seen, while changes to the maximum

bid level hav e little imp act up on C * * *, the C * *

measure is highly responsive and must therefore

be treated with some caution. Hence the authors '

prefer ence is for the C* * * mea sure as derived

from the full log-logistic model , i .e., mea n WT P

= £140 as estimated from Eq. 3.

28 The importance of choosing the correct functional form is

underlined by the result that mean WTP for comparable (but

poorer fitting) linear logistic models, ranges from £238 to £256

(full details in Bateman et a l. , 1993). Note that, so as to

ensure comparability with reported OE means, all those who

refused to pay anything at all were included as zeros (ran-

domly distributed across bid levels) in the calculation of DC

means.

Table 3

Mean WTP measures: impact of changing the maximum bid

level/truncation point in Eq. 2

Maximum bid level and Truncation option

C** truncation point C** C***

£500 112 144

£200 84 150

£100 59 142


15/19


16/19

176 l .J . B a t e m a n e t a l. / E c o l o g i c a l E c o n o m i c s 1 2 1 9 9 5 ) 1 6 1 - 1 7 9

H o w e v e r , c o m p a r a t i v e a n a l y s i s c a n b e u s e d t o

i l lu s t r a te t h e s t r e n g t h o f t h e a p p a r e n t c o g n i ti v e

d i f f e re n c e b e t w e e n r e s p o n s e s to O E a n d D C

q u e s t i o n s. I n o r d e r t o u n d e r l i n e t h is d i f f e r e n c e i t

w a s d e c i d e d t o t r e a t a l l t h e O E r e s p o n s e s a s i f

t h e y h a d c o m e f r o m D C q u e s t i o n s , i .e ., a n O E

W T P b i d o f £ 1 0 w a s t a k e n a s a y e s r e s p o n s e to

b i d l e v e l s £ 1 , £ 5 a n d £ 1 0 a n d a n o r e s p o n s e t o

a ll o t h e r s. H e r e t h e ( o p t i m a l ) l o g - lo g i st ic m o d e l

g a v e a v e r y m u c h p o o r e r f it t o t h e d a t a ( r e s i d u a l

d e v i a n c e o f 22 7 .7 2 w i th 6 d e g r e e s o f f r e e d o m )

t h a n i t d i d f o r t h e g e n u i n e D C d a t a ( r e s i d u a l

d e v i a n c e o f 6. 24 ). T h i s i n d i c a t e s t h a t t h e f o r m a t

u s e d i n D C q u e s t i o n i n g p l a c e s r e s p o n d e n t s w i t h i n

a fi x e d f r a m e w o r k o f e v a l u a t i n g t h e i r W T P , v e r y

w e l l d e s c r i b e d b y t h e l o g - lo g i st ic m o d e l , w h e r e a s

O E r e s p o n d e n t s a p p e a r t o b e u n d e r g o i n g s i gn if i-

c a n t l y d i f f e r e n t c o g n i t iv e p r o c e s s e s i n f o r m u l a t i n g

a n d s t a t i n g t h e i r r e s p o n s e s . 3 1

8 T h e I B e x p e r i m e n t : R e s u l t s a n d d i s c u s s i o n

A l l r e s p o n d e n t s i n it ia l ly p r e s e n t e d w i t h a D C

W T P q u e s t i o n w e r e t h e n e n t e r e d i n t o t h e I B

b i d d i n g g a m e . D i s c u s s i o n o f w i l l i n g n e s s t o p a y

a n y t h i n g a t a l l a n d r e a s o n s f o r r e f u s a l f o r t h e

I B s a m p l e a r e t h e r e f o r e a s fo r th e D C e x p e ri -

m e n t .

T h e o p e n - e n d e d W T P q u e s t i o n p r e s e n t e d a t

t h e e n d o f t h e I B p r o c e d u r e g a v e a m e a n W T P o f

£ 7 4 .9 1 ( 9 5 % C I = £ 6 9 .2 7 ; £ 8 0. 5 5) . H o w e v e r , a s i n

t h e O E e x p e r i m e n t , t h is a m o u n t w a s h i g h ly r e -

s p o n s i v e to t h e t r u n c a t i o n o f h i g h e r W T P b i ds . 32

O m i s s io n o f t h e u p p e r 5 % o f re s p o n s e s, f o r e x -

a m p l e , r e s u l t e d i n a 3 0 % d e c l i n e i n t h e m e a n t o

£ 5 2. 41 . A s i n t h e O E e x p e r i m e n t t h e n , t h e p o s s i -

b i li ty th a t c e r t a i n r e s p o n d e n t s e n g a g e i n s t r a t e g ic

o v e r b i d d i n g c a n n o t b e r u l e d o u t .

A s t h e f i n a l W T P b i d i n t h e i t e r a t i v e b i d d i n g

g a m e w a s g iv e n i n r e s p o n s e t o a n O E q u e s t io n ,

t h e d e p e n d e n t v a r i a b l e i n a n y b i d c u r v e e s t i m a -

t i o n w i ll b e c o n t i n u o u s , b u t t r u n c a t e d a t z e r o . B i d

31 Anot her a

Documents

Bateman 1995 - Ecological Economics