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Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations

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  • Seung-Hoon Yoo
  • Seung-Jun Kwak
  • Tai-Yoo Kim
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    Abstract

    Modelling household behaviour with the data from dichotomous choice contingent valuation (DCCV) surveys is often complicated by zero willingness to pay (WTP) responses in the sample. To deal with the zero responses, a two-equation model is considered, which incorporates a two-level decision structure, a decision on whether to participate in having WTP and a decision on the WTP amount conditional on deciding to participate, and two separate stochastic processes that determine the probability and conditional level of WTP are featured. The model is empirically applied to household survey data, in which the DCCV questions concerned the benefits of air quality improvement in Korea. To put the issue of the two-equation model in perspective, this paper also experiments with economic and econometric specifications: utility theoretic restriction and heteroscedasticity. It is shown how failure to allow for the restriction distorts aggregate benefit estimates and the existence of heteroscedasticity in error term is found.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840122117
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 33 (2001)
    Issue (Month): 4 ()
    Pages: 523-529

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    Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:523-529

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    Cited by:
    1. Seung-Hoon Yoo, 2004. "Determinants of subscription time for portable internet service," Applied Economics Letters, Taylor & Francis Journals, vol. 11(15), pages 931-934.
    2. Raymond Y.T. Yeung & Gabriel M. Leung & Sarah M. McGhee & Janice M. Johnston, 2004. "Waiting time and doctor shopping in a mixed medical economy," Health Economics, John Wiley & Sons, Ltd., vol. 13(11), pages 1137-1144.
    3. Halkos, George & Jones, Nikoleta, 2011. "Social factors influencing the decision to pay for the protection of biodiversity: A case study in two national parks of Northern Greece," MPRA Paper 34581, University Library of Munich, Germany.
    4. Leung, Gabriel Matthew & Yeung, Raymond Yue Ting & Wong, Irene Oi Ling & Castan-Cameo, Susana & Johnston, Janice Mary, 2006. "Time costs of waiting, doctor-shopping and private-public sector imbalance: Microdata evidence from Hong Kong," Health Policy, Elsevier, vol. 76(1), pages 1-12, March.
    5. Polyzou, E. & Jones, N. & Evangelinos, K.I. & Halvadakis, C.P., 2011. "Willingness to pay for drinking water quality improvement and the influence of social capital," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 74-80, February.
    6. Neil Powe & Kenneth Willis & Guy Garrod, 2006. "Difficulties in valuing street light improvement: trust, surprise and bound effects," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 371-381.

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