Three reasons to use annual payments in contingent valuation surveys: Convergent validity,discount rates,and mental accounting |
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| Institution: | 1. Economics Division, Stirling Management School, University of Stirling, Scotland, UK;2. Research, Denmark, Incentive, Denmark;3. Department of Food and Resource University of Copenhagen, Denmark;1. Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Budapest, Hungary;2. CEPR, London, United Kingdom;1. Faculty of Economics, University of Ljubljana, Slovenia & Institute for Economic Research, Ljubljana, Slovenia;2. Institute for Economic Research, Ljubljana, Slovenia;3. Faculty of Administration, University of Ljubljana, Slovenia;1. School of Spatial Planning & Development, Aristotle University of Thessaloniki, GR-54124, Thessaloniki, Greece;2. School of Civil Engineering, Aristotle University of Thessaloniki, Greece;3. School of Civil Engineering, Aristotle University of Thessaloniki, Greece;1. Department of Agricultural and Resource Economics and Global Institute for Water Security, University of Saskatchewan, 101-121 Research Drive, Saskatoon, Saskatchewan, S7N 0X4, Canada;2. Department of Resource Economics & Environmental Sociology, University of Alberta, Canada |
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| Abstract: | We present three arguments for using ongoing annual payments in contingent valuation (CV) surveys that estimate the benefit of a long-lasting environmental improvement. First, by matching the duration of the payments with the duration of the environmental benefits, survey respondents are spared from performing complicated present value calculations. Second, willingness to pay (WTP) estimates from CV surveys that include ongoing annual payments best match WTP estimates obtained using travel cost surveys. Third, respondents are less likely to face binding mental budget constraints with ongoing annual payments than with a larger one-time payment. In addition, respondents’ discount rates may be estimated by collecting non-hypothetical, individual time preference data as part of the valuation survey. |
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| Keywords: | Discounting Contingent valuation Convergent validity Willingness to pay Time frame Time horizon Wetlands |
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