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A Spatial Probit Modeling Approach to Account for Spatial Spillover Effects in Dicotomous Choice Contingent Valuation Surveys

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  • Loomis, John B.
  • Mueller, Julie M.

Abstract

We present a demonstration of a Bayesian spatial probit model for a dichotomous choice contingent valuation method willingness-to-pay (WTP) questions. If voting behavior is spatially correlated, spatial interdependence exists within the data, and standard probit models will result in biased and inconsistent estimated nonbid coefficients. Adjusting sample WTP to population WTP requires unbiased estimates of the nonbid coefficients, and we find a $17 difference in populationWTP per household in a standard vs. spatial model. We conclude that failure to correctly model spatial dependence can lead to differences in WTP estimates with potentially important policy ramifications.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 01 (February)
Pages:

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Handle: RePEc:ags:joaaec:143663

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Web page: http://www.saea.org/jaae/jaae.htm
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Related research

Keywords: Bayesian estimation; contingent valuation; spatial probit; willingness to pay; Environmental Economics and Policy; C11; Q51;

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  1. Richardson, Leslie & Loomis, John, 2009. "The total economic value of threatened, endangered and rare species: An updated meta-analysis," Ecological Economics, Elsevier, vol. 68(5), pages 1535-1548, March.
  2. Holloway, Garth & Shankar, Bhavani & Rahman, Sanzidur, 2002. "Bayesian spatial probit estimation: a primer and an application to HYV rice adoption," Agricultural Economics, Blackwell, vol. 27(3), pages 383-402, November.
  3. Gregory L. Poe & Kelly L. Giraud & John B. Loomis, 2005. "Computational Methods for Measuring the Difference of Empirical Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 353-365.
  4. Mueller, Julie M. & Loomis, John B., 2010. "Bayesians in Space: Using Bayesian Methods to Inform Choice of Spatial Weights Matrix in Hedonic Property Analyses," The Review of Regional Studies, Southern Regional Science Association, vol. 40(3), pages 245-255.
  5. Richard Carson & Robert Mitchell & Michael Hanemann & Raymond Kopp & Stanley Presser & Paul Ruud, 2003. "Contingent Valuation and Lost Passive Use: Damages from the Exxon Valdez Oil Spill," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(3), pages 257-286, July.
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