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Repeated Dichotomous Choice Formats for Elicitation of Willingness to Pay: Simultaneous Estimation and Anchoring Effect

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  • Jorge Araña

    ()

  • Carmelo León

    ()

Abstract

Repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good. In this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process. The model allows us to study the evolution of anchoring effects after the second dichotomous choice question. Estimation involves the Bayesian techniques of Gibbs sampling and data augmentation, and the application focuses on the preservation value of a natural area. The results for a data set involving up to four successive dichotomous choice questions show that restricted multiple-bounded models are rejected by the data with the general model. In addition, willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model. When taking anchoring effects into consideration, it is revealed that individuals’ responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions. Nevertheless, they do not have a significant effect on welfare estimates. Copyright Springer Science+Business Media, Inc. 2007

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File URL: http://hdl.handle.net/10.1007/s10640-006-9038-7
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 36 (2007)
Issue (Month): 4 (April)
Pages: 475-497

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Handle: RePEc:kap:enreec:v:36:y:2007:i:4:p:475-497

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: anchoring effects; Bayesian methods; contingent valuation; endogeneity; repeated dichotomous choice; simultaneous equations; C110; C250; Q510; D120;

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References

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Cited by:
  1. Cho, Seong-Hoon & Yen, Steven T. & Bowker, James Michael & Newman, David H., 2008. "Modeling Willingness to Pay for Land Conservation Easements: Treatment of Zero and Protest Bids and Application and Policy Implications," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(01), April.

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