Contingent Valuation

1
Contingent Valuation

• Bangkok 2013

2
Stated Preference

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

3
Attitudinal Questions

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

4
Method

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

5
Application- Valuation

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

6
Payment vehicle

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

7
Comparison with Revealed Preference

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

8
Limitations

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

9
Information tends not to be neutral

• Some information is purely a fact (hectares of
  forest)
• Much information is value laden
• Unique natural landscape
• Precious remaining forest
• Threatened tigers
• Provision of information can bias responses by
  tapping values even more important than the
  environment

10
Value Exxon Valdez Oil Spill

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

11
WTP vs WTA

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

12
Protest votes

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

13
Remove protest votes

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

14
Existence Value

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

15
Exercise

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