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The sensitivity of willingness to pay to an economic downturn

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  • Paul J. Metcalfe
  • William Baker

Abstract

Stated preference studies are typically undertaken at one point in time, while the results may be relied on in decision-making several months or even years later. This reliance is only justified if values are stable over time, an assumption which is doubtable given the onset of an economic downturn. We assess the reliability of values taken before an economic downturn for application during the downturn, via analysis of responses to two near-identical surveys conducted, respectively, before and during the 2008-2010 economic recession. The surveys were valuing near identical sets of permanent water sector service and environmental improvements. Each survey employed a dichotomous choice and a payment card contingent valuation question. Our main result is that the economic downturn led to lower payment card responses but had no effect on the values elicited via a dichotomous choice (i.e. referendum-type) contingent valuation question. We explore potential explanations for this finding in light of the literature on closed-ended versus open-ended elicitation method comparisons.

Suggested Citation

  • Paul J. Metcalfe & William Baker, 2015. "The sensitivity of willingness to pay to an economic downturn," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 4(1), pages 105-121, March.
    • Handle: RePEc:taf:teepxx:v:4:y:2015:i:1:p:105-121
    DOI: 10.1080/21606544.2014.978821
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    Cited by:

    1. J. Price & D. Dupont & W. Adamowicz, 2017. "As Time Goes By: Examination of Temporal Stability Across Stated Preference Question Formats," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 643-662, November.
    2. Paul Mwebaze & Jeff Bennett & Nigel W. Beebe & Gregor J. Devine & Paul Barro, 2018. "Economic Valuation of the Threat Posed by the Establishment of the Asian Tiger Mosquito in Australia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 357-379, October.
    3. Jie He & Bing Zhang, 2021. "Current Air Pollution and Willingness to Pay for Better Air Quality: Revisiting the Temporal Reliability of the Contingent Valuation Method," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(1), pages 135-168, May.
    4. Wanggi Jaung & Louis Putzel & Gary Q. Bull & Diswandi Diswandi & Witardi & Markum, 2019. "Temporal Reliability of Willingness to Pay for Payments for Environmental Services: Lessons from Lombok, Indonesia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-22, October.
    5. Galina Williams, 2022. "Temporal stability of WTP estimates in labeled and unlabeled choice experiment for emissions reduction options, Queensland, Australia," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 24(4), pages 533-550, October.

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