Contingent Valuation and Real Economic Commitments: A Private Good Experiment

The ultimate test of the accuracy of contingent valuation methods (CVM), in measuring benefits, is whether subjects will actually pay the amounts that they say they would be willing to pay in a CVM study. An experiment was conducted in which the maximum WTP of potential visitors to enter Warkworth Castle was compared against the acceptance of an entrance ticket at their stated CV price, thus providing a real monetary test of value and behavioural intention. Only 40% of potential visitors at the Castle gate were willing to make a real economic commitment following their CV WTP responses. Whilst the CVM results were found to be comparable with other CVM studies in terms of content and construct validity, they clearly failed a criterion validity test, even when the CVM survey was juxtaposed to the behavioural intention stage. CVM studies need to adopt stringent criteria in deciding the 'truthfulness' and 'legitimacy' of WTP responses, if CVM is to provide accurate and robust estimates of the value of environmental goods.     

Economic Value of Instream Flow for Non-Commercial Whitewater Boating Using Recreation Demand and Contingent Valuation Methods

Whitewater river kayaking and river rafting require adequate instream flows that are often adversely affected by upstream water diversions. However, there are very few studies in the USA of the economic value of instream flow to inform environmental managers. This study estimates the economic value of instream flow to non-commercial kayakers derived using a Travel Cost Method recreation demand model and Contingent Valuation Method (CVM), a type of Contingent Behavior Method (CBM). Data were obtained from a visitor survey administered along the Poudre River in Colorado. In the dichotomous choice CVM willingness to pay (WTP) question, visitors were asked if they would still visit the river if the cost of their trip was $Y higher, and the level of $Y was varied across the sample. The CVM yielded an estimate of WTP that was sensitive to flows ranging from $55 per person per day at 300 Cubic Feet per Second (CFS) to a maximum $97 per person per day at flows of 1900 CFS. The recreation demand model estimated a boater’s number of trips per season. We found the number of trips taken was also sensitive to flow, ranging from as little as 1.63 trips at 300 CFS to a maximum number of 14 trips over the season at 1900 CFS. Thus, there is consistency between peak benefits per trip and number of trips, respectively. With an average of about 100 non-commercial boaters per day, the maximum marginal values per acre foot averages about $220. This value exceeds irrigation water values in this area of Colorado.     

MEASURING THE VALUE OF POTABLE WATER IN PARTIALLY MONETIZED RURAL ECONOMIES1

ABSTRACT: A pilot study was conducted to test the potential of the Contingent Valuation Methodology (CVM) to reveal the value of non-market goods in a partially monetized subsistence economy. CVM was used to estimate the willingness to pay, in the form of labor, for potable drinking water in a rural river-based community located in the Esmeraldas state of northwest Ecuador. Surveys were administered by personal interviews with families living along the waterways of the Santiago river system who used river water for cooking, drinking, washing, and waste disposal. The mean willingness to pay represented over 23 percent of real income, or 1.4 days per week for a period of one year. Results of multiple regression analysis identified the history of water-related health problems and the number of working adults in a household as significant determinants of willingness to pay. Using a non-monetary, rather than a monetary measure of willingness to pay may provide a more accurate representation of value in a subsistence economy where the use of money is limited. The potential for CVM to measure the benefits of non-market goods in rural developing regions whose economies are only partially monetized is demonstrated.     

The expert valuation method for assessing agro‐environmental policy

The Contingent Valuation Method (CVM) and other conventional valuation methods of non‐market goods often prove to be unsuitable for the evaluation of the benefits of agro‐environmental policy. Therefore, a new method is introduced, according to which a group of experts jointly evaluates the strengths, weaknesses and finally monetary benefit of agro‐environmental programmes. While the methodology combines expert surveys, group discussions and CVM, its theoretical background is merit good theory. Compared to CVM, the most important practical difference in its outcome is the greater openness of the results. As an example, the Expert Valuation Method is applied to two groups of agro‐environmental policy measures in Switzerland. Suggestions for more efficient levels of reimbursements are made.     

Estimating irrigation water demand in the Moroccan Drâa Valley using contingent valuation

Irrigation water management is crucial for agricultural production and livelihood security in Morocco as in many other parts of the world. For the implementation of an effective water management, knowledge about farmers' demand for irrigation water is crucial to assess reactions to water pricing policy, to establish a cost-benefit analysis of water supply investments or to determine the optimal water allocation between different users. Previously used econometric methods providing this information often have prohibitive data requirements. In this paper, the Contingent Valuation Method (CVM) is adjusted to derive a demand function for irrigation water along farmers' willingness to pay for one additional unit of surface water or groundwater. An application in the Middle Draa Valley in Morocco shows that the method provides reasonable results in an environment with limited data availability. For analysing the censored survey data, the Least Absolute Deviation estimator was found to be a more suitable alternative to the Tobit model as errors are heteroscedastic and non-normally distributed. The adjusted CVM to derive demand functions is especially attractive for water scarce countries under limited data availability.     

Air quality assessment by contingent valuation in Ji'nan, China

Along with urbanization and environmental deterioration within China, many residents' desire for improved air quality has increased. To address this topic, this study focuses on the relationship between poor air quality and residents' willingness to pay for improved air quality in the city of Ji'nan. As a means of quantifying an individual's willingness to pay (WTP) for improved air quality, a contingent valuation method (CVM) was employed. A sample of 1500 residents was chosen, based on the stratified sampling method. The respondents' WTP was then elicited through a series of face-to-face interviews, conducted using a range of hypothetical, open-ended scenario questions. The results showed that 59.7% of respondents were able to express a positive WTP, and that the average WTP was 100 Chinese Yuan (CNY) per person, per year. In order to establish the relationship between endogenous variables and WTP, both a Probit model on the probability of a positive WTP, and a stepwise regression model were constructed. Most parameters in the econometric analysis demonstrated the expected results. It was found that annual household income, expenditure on the treatment of respiratory diseases and workers in the family significantly influenced WTP. The rates of positive WTP and the monetary amount were also larger for men than for women. Unlike developed countries, most respondents regard air quality improvement as a government responsibility in that more than 40% of respondents had no incentive to bear the costs of attempting to achieve better air quality, indicating a relatively low environmental consciousness.     

Contingent Valuation and Real Economic Commitments: Evidence from Electric Utility Green Pricing Programmes

This paper presents the findings of two 'green pricing' studies conducted to evaluate public support of utilities' investments in renewable energy technologies. These studies compared hypothetical WTP statements with actual payment commitments. The results of these studies indicate that the CVM can be an accurate indicator of an individual's WTP, but that it is an unreliable predictor of which individuals will actually pay. This has important implications for aggregating mean WTP estimates of the value of environmental benefits. It also suggests that market simulations can be useful for predicting programme participation rates when voluntary donations are used as a payment vehicle.     

Tourist Support for Marine Protection in Nha Trang,Viet Nam

Environmental planners often propose tourism as a means of financing programmes to protect significant environmental areas. Surveys of tourists can provide useful information about the significance of environmental problems, trade-offs among policy objectives, willingness to pay (WTP) for protection programmes and preferences for different payment mechanisms. In Khanh Hoa Province, the provincial People's Committee, the Ministry of Fisheries and the World Conservation Union are working to implement Viet Nam's first marine protected area (MPA) in Nha Trang Bay. This paper reports the results of a survey of local and other Vietnamese and foreign tourists to islands that will be included in the MPA. The majority of respondents thought rubbish on the beaches, water pollution and vendors on beaches were problems and that the MPA was a good idea. Foreign tourists were significantly more likely to perceive environmental problems than were Vietnamese tourists, and persons who agreed there were environmental problems were significantly more likely to support the concept of an MPA, despite the potential for possible economic effects with distributive consequences. WTP for protection was modest and positively correlated with education and income. Although foreign tourists were on average willing to pay more, a larger proportion of Vietnamese tourists were willing to pay some amount to support the MPA. Analyses indicate that changes in income and education expected with economic development will increase both awareness of problems and WTP for protection. The results of this analysis are both encouraging and cautionary. The need for an MPA is clearly recognized by most tourists, and most tourists are willing to pay small fees to support the MPA. Given that education has significant impacts on both perceptions of problems and WTP, educational programmes may be an effective strategy for managing the competing objectives of protection and use.     

Social and economic considerations in conserving wetlands of indo-gangetic plains: A case study of Kabartal wetland,India

The Kabartal wetland situated in the upper Indo-Gangetic flood plains in northern India is significant because of its hydrological and ecological services, and the socio-economic and cultural values that it represents. Despite being designated as a wildlife sanctuary, this wetland is under threat from anthropogenic pressures. As in the case of most wetlands, the reason is incomplete information on its ecological services and functions, breakdown of traditional management structures and the lack of appropriate and recognized property rights. Our study assesses the economic linkages between the Kabartal wetland and the local people living around it, through socio-economic surveys and Contingent Valuation Method (CVM). The major objective of the study was to determine the importance of this wetland to the local people and to give an indication of the distribution of the benefits among various stakeholders. The people in the region are poor, have low literacy levels and high dependence on Kabartal and more than 50% want that the wetland should be drained and the land used for agriculture. However, they are willing to participate in collaborative management initiatives with the state. The willingness of people to accept compensation, as an alternative to access to Kabartal wetland, regressed on various socio-economic and attitudinal parameters, gave an estimated mean value of US $27,500 per household over a period of 60 years. This value is a pointer of the total value of access to Kabartal wetland to the surrounding villagers and would be useful when decisions to compensate people for lost access to Kabartal are made.     

Income and distance-decay effects on willingness to pay estimated by the contingent valuation method

This study suggests a methodology for enhancing accuracy in evaluating amenity by the contingent valuation method when household's willingness to pay (WTP) is dependent to its income and the distance between a respondent's residence and the location of a target facility. Using a linear city model, this study demonstrates the influences of income and distance-decay effects on WTP. Simulations are performed to check the validity of the model, as well as to predict consequences when income and distance-decay effects are not properly treated. Finally, the suggested methodology is applied to two real cases. The estimation results from a structural model show that the calculated total benefit varies largely when income and distance-decay effects exist and are ignored. Also, an ad hoc model generates significantly different estimates from the utility difference model this study adopted. The difference in estimates suggests that the total benefit has to be estimated by a structural model.     

Hypothetical and Real Economic Commitments,and Social Status,in Valuing a Species Protection Programme

There has been a long-running debate on the reliability and validity of the contingent valuation method, connected with the hypotheticality of the situation when respondents are asked to state their willingness to pay (WTP) for species protection (the so-called 'hypothetical bias'). Additionally, a number of recent arguments regarding donations to good causes and the benefits of achieving social status have questioned the motives of respondents who have stated their WTP. An experiment at the University of Klagenfurt tested for hypothetical bias by asking participants to state their hypothetical and real WTP for a species protection programme in the Hohe Tauern national park. Hypothetical and real WTP differed significantly. Additionally, it emerged that the pure ecological motive for stating a WTP might be concealed by arguments about donating in order to achieve social status and contributing to a good cause.     

A Comparison of Contingent Valuation Methodology and Ecological Assessment as Techniques for Incorporating Ecological Goods into Land-use Decisions

Contingent valuation methodology (CVM) was used to elicit financial willingness-to-pay bids for five separate sites in southern Scotland. The sites were ranked in decreasing order of the willingness-to-pay to preserve the sites, and this ranking was compared with that obtained from an ecological evaluation of the sites. The major results of this analysis were threefold. Firstly the ranking of sites according to willingness-topay bids did not show good agreement with the ranking according to ecological assessments. Secondly the public valued the landscape, ease of access and openness of the study sites higher than species-related criteria, and finally although increased species richness appeared to provide increased utility to respondents, they were not willing to pay more for the provision of this good. These results suggest that the use of CVM for valuing ecological goods will produce different results to traditional ecological assessments. Although theoretically the provision of better information may increase the accuracy of the CVM results, this may not be easy to undertake in practice. Given these conclusions it is suggested that, given the current state of knowledge, CVM should not be utilized for aiding land-use decisions in the short term.     

An assessment of household willingness to pay for curbside recycling: a comparison of payment card and referendum approaches

Curbside recycling is a tool that communities use to reduce the need for landfill space. This study provides contingent valuation estimates of household willingness to pay (WTP) to continue a curbside recycling program in the face of budget cuts. Comparisons of two forms of the contingent valuation method (CVM) are provided: a single bounded referendum and a payment card. Neither approach emerges as unambiguously superior. Response rates were virtually identical. Both approaches show that support for curbside recycling is highly sensitive to price. Regression results from the payment card provided a more thorough identification of socio-demographic variables associated with WTP than the referendum, but the explanatory power of the two regressions did not differ significantly. The referendum estimates of mean WTP exceed those from the payment card, although the disparities are less than those typically reported in the CVM literature. Local policy makers cited the CVM results as influencing their decisions regarding funding options for the future of the program, and seemed to appreciate the fact that the two approaches provided a fairly narrow range of estimates of WTP. In an era when more of the burden of financing of environmental programs is being shifted to the local level, use of CVM to estimate the WTP of consumers for highly disaggregated goods and services designed to achieve environmental improvement will likely become more relevant to local decision makers who are interested in understanding their constituents' views.     

Urban Australians using recycled water for domestic non-potable use--an evaluation of the attributes price, saltiness, colour and odour using conjoint analysis

Recycled water use in urban areas is viewed as one part of the solution to Australia's water shortage. The effectiveness of policies designed to promote recycled water systems depends on the acceptance by the community of the price, colour, odour and salt content of the recycled water. In Australia and other countries, limited research has been conducted that investigates community attitudes to and willingness to pay for recycled water, especially in urban settings. Community acceptance of recycled water and the economic feasibility of such projects have not been widely evaluated, even though the long-term feasibility of many projects is dependent on such information. This paper examines the attitudes of an urban Australian community living at Mawson Lakes in South Australia, to using recycled water for non-potable domestic purposes. Conjoint analysis (CA) was used to evaluate participant's (n=136) preferences for various attributes of recycled water (colour, odour, salt content and price) for various uses (garden watering, toilet flushing and clothes washing). The analysis was used to estimate the respondent's willingness to pay (WTP) for quality increases for each of the attributes. Differences in WTP were investigated according to various demographic variables including income and education. Results indicate that for garden watering having 'low salt levels' is the most important attribute of recycled water, for clothes washing 'colourless' is the most important attribute, and for toilet flushing a 'low price' was the most important attribute. Respondents were willing to pay for increases in the quality of recycled water. The amount they were willing to pay varied depending on applied use and the attribute in question. Respondents were most willing to pay for an increase in quality of recycled water when used for clothes washing (willing to pay Australian dollars (A$) 0.07/cubic meter (m(3)) for removal of colour, A$0.065 per cubic meter for an increase in quality of recycled water from 'salty' to 'low salt,' and A$ 0.06/m(3) for removal of odour (1A$=0.75 US $ and 0.62 euro, August 24, 2005)). Segmentation of the price attribute by demographic sectors reveals that those in the higher income bracket, higher education sector, middle age group, and who are male, had a higher marginal valuation on price. The results of this study provide important information for recycled water retailers and water policy developers, helping achieve greater economic feasibility for future recycled water projects, to the satisfaction of the communities involved.     

ARE RURAL RESIDENTS WILLING TO PAY ENOUGH TO IMPROVE DRINKING WATER QUALITY?1

ABSTRACT: The concentrations of iron and sulfate in community water supplies are a concern for a number of areas in southwestern Minnesota. This study used the contingent valuation method to determine how much consumers would be willing to pay to improve their drinking water quality. On average, individuals were willing to pay US$5.25 per month (in 1995 U.S. dollars) to reduce the level of iron and US$4.33 per month to reduce the level of sulfate in their water to the USEPA's secondary standards for drinking water quality. Respondents with negative perceptions of their drinking water quality were willing to pay more to improve water quality. The aggregate annual willingness to pay (WTP) for all consumers in community water systems in southwestern Minnesota that were out of compliance with water quality standards were estimated to be US$2.4 million and US$2.0 million (in 1995 dollars) for reducing the levels of iron and sulfate, respectively. Yet the total WTP of consumers who use small community water systems may not be enough to pay the full cost of providing improved water in those systems. Economies of scale in water treatment and difficulties in financing improvements mean that technical innovation, government assistance, or institutional changes may be needed to improve water quality in these areas.     

Impact of Socio-demographic Factors on Willingness to Pay for the Reduction of a Future Health Risk

Knowledge of socio-demographic factors affecting attitudes to and perception of risk is an important instrument in enhancing efficiencies of interventions. The authors evaluated whether socio-demographic variables affected attitudes to an environmental issue (securing future drinking water). An important aspect was the delay between time of environmental pollution and time of human exposure and thereby potential health risk. Gender, education, place of residence and age all influenced the extent to which individuals were willing to allocate present resources to alleviate a future problem. Specifically, people above the age of 50 appeared more reluctant to pay for an intervention against a future potential health threat. The authors found a significant correlation between attitude and willingness to pay (WTP). In the authors' scenarios, the WTP variable worked more as a dichotomous variable than as a continuous variable, stressing the importance and relevance of the WTP=0 answers.     

Stakeholder Willingness to Pay for Watershed Restoration in Rural Bolivia1

Abstract: Two CVM surveys were administered to 211 urban households and 188 rural farmer‐irrigators in the Comarapa watershed in Bolivia, South America, to estimate stakeholder willingness to pay (WTP) for a proposed upper watershed restoration program. Mean monthly household WTP to improve drinking water was $1.95 (65% of current charges), while mean annual WTP among farmer‐irrigators to improve irrigation water was $17 per hectare (34% of current costs). Aggregated to the entire population of households and farmer‐irrigators total WTP is $77,400 per year, which is 77% of the minimum cost to implement a watershed restoration program.     

Preventing land loss in coastal Louisiana: estimates of WTP and WTA

A dichotomous-choice contingent-valuation survey was conducted in the State of Louisiana (USA) to estimate compensating surplus (CS) and equivalent surplus (ES) welfare measures for the prevention of future coastal wetland losses in Louisiana. Valuations were elicited using both willingness to pay (WTP) and willingness to accept compensation (WTA) payment vehicles. Mean CS (WTP) estimates based on a probit model using a Box-Cox specification on income was $825 per household annually, and mean ES (WTA) was estimated at $4444 per household annually. Regression results indicate that the major factors influencing support for land-loss prevention were income (positive, WTP model only), perceived hurricane protection benefits (positive), environmental and recreation protection (positive), distrust of government (negative), age (positive, WTA model only), and race (positive for whites).     

Revealing Preferences for Reductions of Public Risks: An Application of the CV Approach

In this paper the contingent valuation method (CVM) is applied to public risk reduction. Theory suggests that the size of the stated willingness to pay (WTP) for risk reduction depends on private activities aimed at reducing the risk level for the individual. The empirical results suggest that considering private averting activities increases the explanatory power of the estimated WTP function significantly. Thus, WTP passes the scope test which proposes that larger reductions from a larger baseline risk should be valued higher than lower risk reductions from a lower baseline risk. Furthermore, we demonstrate that the follow-up response format induces anchoring effects.     

Assessing Public Preferences for Forest Biomass Based Energy in the Southern United States

This article investigated public preferences for forest biomass based liquid biofuels, particularly ethanol blends of 10% (E10) and 85% (E85). We conducted a choice experiment study in three southern states in the United States: Arkansas, Florida, and Virginia. Reducing atmospheric CO₂, decreasing risk of wildfires and pest outbreaks, and enhancing biodiversity were presented to respondents as attributes of using biofuels. Results indicated that individuals had a positive extra willingness to pay (WTP) for both ethanol blends. The extra WTP was greater for higher blends that offered larger environment benefits. The WTPs for E10 were $0.56 gallon^?1, $0.58 gallon^?1, and $0.48 gallon^?1, and for E85 they were $0.82 gallon^?1, $1.17 gallon^?1, and $1.06 gallon^?1 in Arkansas, Florida, and Virginia, respectively. Although differences in WTP for E10 were statistically insignificant among the three states, significant differences were found in the WTP for E85 between AR and FL and between AR and VA. Preferences for the environmental attributes appeared to be heterogeneous, as respondents’ were willing to pay a premium for E10 in all three states to facilitate the reduction of CO₂ and the improvement of biodiversity but were not willing to pay more for E85 in order to enhance biodiversity.