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The effect of individual ‘ability to choose’ (scale heterogeneity) on the valuation of environmental goods

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  • Christie, Mike
  • Gibbons, James
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    Abstract

    Environmental valuation methods, such as choice experiments, are increasingly being used to value complex and often unfamiliar environmental goods. A potential risk is that some survey respondents may not be capable of developing and expressing preferences for such goods. The noise from these individuals may then conceal the well-defined preferences of other respondents and affect valuation estimates. We address this problem by estimating a range of models that accounts for scale heterogeneity (which we interpret as a respondent's ability to choose: ATC) and taste heterogeneity. These models are applied to two case studies: amenity from coastal defence and biodiversity. In both case studies, model fit was improved in a scale-heterogeneity multinomial-logit (S-MNL) model (compared to a standard MNL model) suggesting the accounting for ATC (scale heterogeneity) improved preference revelation. A mixed multinomial-logit (MIXL) model outperformed the S-MNL model suggesting that accounting for taste heterogeneity was also important. However, a generalised multinomial-logit (G-MNL) model improved model fit over the MIXL model only for the biodiversity data suggesting that for these data both taste heterogeneity and ATC were important. We conclude that accounting for ATC can improve the reliability and robustness of the results when valuing complex or unfamiliar environmental goods.

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    Bibliographic Info

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 70 (2011)
    Issue (Month): 12 ()
    Pages: 2250-2257

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    Handle: RePEc:eee:ecolec:v:70:y:2011:i:12:p:2250-2257

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    Web page: http://www.elsevier.com/locate/ecolecon

    Related research

    Keywords: Choice experiments ability to choose; Willingness to pay; Multinomial logit models; Bayesian modelling; Individual heterogeneity; Complex environmental goods; Biodiversity; Ecosystem; Services; Coastal defence;

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    Cited by:
    1. repec:stl:stledp:2014-06 is not listed on IDEAS
    2. Kragt, Marit E., 2013. "Comparing models of unobserved heterogeneity in environmental choice experiments," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152198, Australian Agricultural and Resource Economics Society.
    3. Czajkowski, Mikolaj & Hanley, Nicholas & LaRiviere, Jacob & Simpson, Katherine, 2014. "What is the Causal Effect of Information and Learning about a Public Good on Willingness to Pay?," Stirling Economics Discussion Papers 2014-05, University of Stirling, Division of Economics.
    4. Zander, Kerstin K. & Signorello, Giovanni & De Salvo, Maria & Gandini, Gustavo & Drucker, Adam G., 2013. "Assessing the total economic value of threatened livestock breeds in Italy: Implications for conservation policy," Ecological Economics, Elsevier, vol. 93(C), pages 219-229.
    5. Ulf Liebe & Jürgen Meyerhoff & Volkmar Hartje, 2012. "Test–Retest Reliability of Choice Experiments in Environmental Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 53(3), pages 389-407, November.
    6. Anna Bartczak & Jürgen Meyerhoff, 2012. "Valuing the chances of survival of two distinct Eurasian lynx populations in Poland – do people want to keep doors open?," Working Papers 2012-14, Faculty of Economic Sciences, University of Warsaw.

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