Disparity between hypothetical and actual willingness to pay in a biodiversity conservation context.

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Disparity between hypothetical and actual
willingness to pay in a biodiversity conservation
context.

• Dr. Michael Christie
• Institute of Rural Sciences
• University of Wales Aberystwyth

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Overview

• Overview of CV criterion validity tests
• Case study CV study of the value of Red Kite
  conservation in Wales
• Conclusions

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Biodiversity valuation

• Over the past 20 years or so, there have been
  numerous studies that have attempted to value
  biodiversity, for an overview, see
• Nunes and van der Bergh (2001)
• OECD (2001)
• But how reliable are the findings from such
  studies?

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Are WTP values elicited in contingent valuation
studies valid ?

• Does the study follow NOAA guidelines?
• Undertake validity tests
• Content validity Does the survey accurately
  reflect the good?
• Construct validity Model WTP responses against
  respondent characteristics.
• Criterion validity Compare hypothetical WTP
  values with actual WTP values.

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Criterion validity tests

• Generally, Hypothetical WTP gt Actual WTP
• Mostly based on laboratory experiments.
• Very few address environmental goods.
• A truly rigorous criteron test would use
• Field tests
• An environmental good

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Research Aims

• Using the case study of Red Kite conservation in
  Wales, the research will aim to
• Test H0 HWTP AWTP
• Since empirical (lab) studies suggest HWTP gt
  AWTP
• We will also aim to identify reasons for any
  disparity between hypothetical and actual WTP.
  Therefore, we will compare
• The size of bids between treatments
• Stated intentions to pay and actual payments

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Red Kites in Wales

• The Red Kite used to be common in Wales.
• But following 400 year persecution, only 6 Kites
  left in Wales in 1900.

• Recent government-funded effort has
  re-established Kite populations.

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Red Kites in Wales

• However, government funding stopped in 1997, and
  the Welsh Kite Trust charity was formed to
  continue conservation efforts.
• Objectives of WKT
• research Kites requirements
• nest protection
• raise public awareness of Kites
• provide information about Kites
• However, limited funds meant that the plight of
  the Kite is not now secure!

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Experimental Design

• Two treatments
• Hypothetical WTP to simulate CV studies
• Actual WTP actual cash donations to WKT
• Comparisons between treatments
• Bid levels
• positive bids only
• positive zero bids
• Stated intentions to pay with actual payment

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Comparison of hypothetical and actual WTP for
Kite conservation
Donation (positive and genuine zero bids) Donation (positive and genuine zero bids) Donation (positive bids only) Donation (positive bids only)
Treatment Hypothetical donation Actual donation Hypothetical donation Actual donation
Mean WTP 4.35 1.28 5.06 3.94
Median WTP 2.5 0 5 2
SD 5.37 2.92 5.47 3.99
n 93 80 80 26
T-test t 4.571 P 0.000 t 4.571 P 0.000 t 0.962 p 0.338 t 0.962 p 0.338
Mann-Whitney U M-W U 1481.5 P 0.000 M-W U 1481.5 P 0.000 M-W U 792.5 p 0.06 M-W U 792.5 p 0.06
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Comparison of hypothetical and actual WTP for
Kite conservation

• HWTP(poszero) gt AWTP(poszero)
• HWTPpos AWTPpos
• This suggests that
• actual bid levels were similar between
  treatments,
• but there were more zero bids in the actual
  treatment compared to hypothetical treatment.

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Stated intention to pay versus actual payment
made between treatments
Hypothetical treatment Hypothetical treatment Actual treatment Actual treatment
Response Intention to pay (HI) Hypothetical donation (HD) Intention to pay (AI) Actual donation (AD)
Yes, would pay () 67.3 79.6 56.8 25.5
Maybe pay () 12.2 21.6
No, wouldn't pay () 20.4 20.4 21.6 74.5
N 98 98 102 102
Chi-square Probability ?2 0.031 p 0.859 ?2 0.031 p 0.859 ?2 57.19 p 0.000 ?2 57.19 p 0.000
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Stated intention to pay versus actual payment
made between treatments

• HI AI No difference in intending to pay
  between treatments
• HD ? AD Difference in stating an amount
  between treatments
• HI HD No difference in stating an intention
  to pay and stating a hypothetical amount.
• AI ? AD Difference in stating an intention
  to pay and stating an actual amount.

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Summary of key results

• Hypothetical WTP was 3 times greater that actual
  WTP consistent with other criterion validity
  experiments
• However,
• The value of bids were consistent between
  treatments
• People over-stated intention to pay in
  hypothetical treatment.

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Why did respondents over-stated intention to pay
in hypothetical treatment?

• Design issues in this experiment relating to how
  people could make actual donations?
• OR
• Inherent problem in CV that stimulates more
  people to express a WTP amount that they would in
  a real situation?
• Warm glow effect
• Cheap talk aims to help make respondents more
  aware of implications of stating a WTP amount,
  but may need more emphasis on initially
  determining whether people would actually pay at
  all!

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What constraints or limitations would you expect
to face regarding the use of preference and
attitude information for actual policy
formulation or implementation?

• Reliability although much effort has been
  undertaken to improve reliability, criterion
  validity test consistently show over-estimation.
• Policy makers, however, do appear to be embracing
  the results from valuations (albeit with caution).

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Thank you for your interest

• Christie M (2007) An examination of the disparity
  between hypothetical and actual willingness to
  pay for Red Kite conservation using the
  contingent valuation method. Canadian Journal of
  Agricultural Economics 55, 159-169.

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Tobit model of Hypothetical and Real WTP for Red
Kite conservation
Variable Hypo Actual Description
Everseen 3.67 (1.14) 5.28 (1.42) Dummy for whether the respondent has ever seen a Kite 1 yes, 0 no
LiveWales -0.38 (1.13) -1.64 (1.25) Dummy for whether the respondent lives in Wales 1 yes, 0 no.
Gender -0.08 (1.15) -0.21 (1.26) Gender of respondent Male 1, Female 0
Income 3.89-05 (5.05-05) 8.21-06 (6.09-05) Income of respondent
Member 3.95 (1.16) 5.36 (1.36) Dummy for membership of Environmental organisation 1 yes, 0 no.
Constant 0.01 (1.44) -5.20 (1.71
LL function -257.27 -91.94
N 93 80
LM test for tobit 30.87 4.63
ANOVA base fit measure 0.079 0.388