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Statistical Approaches to the Fat Tail Problem for Dichotomous Choice Contingent Valuation

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Author Info

  • Richard C. Ready
  • Dayuan Hu

Abstract

If a cumulative density function estimated from dichotomous choice data has an unrealistically fat right-hand tail, mean willingness to pay (WTP) will be overestimated. Truncating the range of integration results in a lower-bound estimate of the true mean WTP. A normalization procedure proposed by Boyle, Welsh, and Bishop (1988) unnecessarily depresses the estimate further. A new statistical approach is presented that allows a best-guess estimate of mean WTP. Because this estimate involves extrapolation beyond the range of the data, it tends to be highly variable.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 71 (1995)
Issue (Month): 4 ()
Pages: 491-499

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Handle: RePEc:uwp:landec:v:71:y:1995:i:4:p:491-499

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Web page: http://le.uwpress.org/

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Cited by:
  1. Halkos, George, 2012. "The use of contingent valuation in assessing marine and coastal ecosystems’ water quality: A review," MPRA Paper 42183, University Library of Munich, Germany.
  2. Kerr, Geoffrey N., 2000. "Dichotomous choice contingent valuation probability distributions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), June.
  3. Bateman, Ian J. & Day, Brett H. & Georgiou, Stavros & Lake, Iain, 2006. "The aggregation of environmental benefit values: Welfare measures, distance decay and total WTP," Ecological Economics, Elsevier, vol. 60(2), pages 450-460, December.
  4. Cook, Darron M., 1999. "A New Psychological Approach to Dichotomous Choice CVM," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 123795, Australian Agricultural and Resource Economics Society.
  5. Poe, Gregory L. & Vossler, Christian A., 2001. "Does Specification Error Explain the Discrepancy Between Open-Ended and Dichotomous Choice Contigent Valuation Responses? A Comment on "Monte Carlo Benchmarks for Discrete Valuation Methods"," Working Papers 127665, Cornell University, Department of Applied Economics and Management.
  6. Scarpa, Riccardo & Chilton, Susan M. & Hutchinson, W. George & Buongiorno, Joseph, 2000. "Valuing the recreational benefits from the creation of nature reserves in Irish forests," Ecological Economics, Elsevier, vol. 33(2), pages 237-250, May.
  7. Powe, N. A. & Bateman, I. J., 2003. "Ordering effects in nested 'top-down' and 'bottom-up' contingent valuation designs," Ecological Economics, Elsevier, vol. 45(2), pages 255-270, June.
  8. Soliño, Mario & Vázquez, María X. & Prada, Albino, 2009. "Social demand for electricity from forest biomass in Spain: Does payment periodicity affect the willingness to pay?," Energy Policy, Elsevier, vol. 37(2), pages 531-540, February.
  9. Carson, Richard T. & Hanemann, W. Michael, 2006. "Contingent Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 17, pages 821-936 Elsevier.
  10. Akter, Sonia & Bennett, Jeffrey W., 2009. "Household perceptions of climate change and preferences for mitigation action: the case of the Carbon Pollution Reduction Scheme in Australia," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47936, Australian Agricultural and Resource Economics Society.
  11. Álvarez Díaz, Marcos & González Gómez, Manuel & Saavedra González, Ángeles & De Uña Álvarez, Jacobo, 2010. "On dichotomous choice contingent valuation data analysis: Semiparametric methods and Genetic Programming," Journal of Forest Economics, Elsevier, vol. 16(2), pages 145-156, April.
  12. Timothy C. Haab & Kenneth E. McConnell, . "A Simple Method for Bounding Willingness to Pay Using a Probit or Logit Model," Working Papers 9713, East Carolina University, Department of Economics.
  13. Emmi Haltia & Jari Kuuluvainen & Ville Ovaskainen & Eija Pouta & Mika Rekola, 2009. "Logit model assumptions and estimated willingness to pay for forest conservation in southern Finland," Empirical Economics, Springer, vol. 37(3), pages 681-691, December.
  14. Pouta, Eija, 2004. "Attitude and belief questions as a source of context effect in a contingent valuation survey," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 229-242, April.
  15. Tuan, Tran Huu & Navrud, Stale, 2009. "Applying the dissonance-minimising format to value cultural heritage in developing countries," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), September.
  16. Catherine Chambers & John Whitehead, 2003. "A Contingent Valuation Estimate of the Benefits of Wolves in Minnesota," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(2), pages 249-267, October.
  17. Timothy Haab, 1999. "Nonparticipation or Misspecification? The Impacts of Nonparticipation on Dichotomous Choice Contingent Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(4), pages 443-461, December.
  18. Kehlbacher, A. & Bennett, R. & Balcombe, K., 2012. "Measuring the consumer benefits of improving farm animal welfare to inform welfare labelling," Food Policy, Elsevier, vol. 37(6), pages 627-633.
  19. Timothy C. Haab & Kenneth E. McConnell, . "Intuitive Bounds on Willingness to Pay," Working Papers 9609, East Carolina University, Department of Economics.
  20. Cooper, Joseph C., 2002. "Flexible Functional Form Estimation of Willingness to Pay Using Dichotomous Choice Data," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 267-279, March.
  21. MacKerron, George J. & Egerton, Catrin & Gaskell, Christopher & Parpia, Aimie & Mourato, Susana, 2009. "Willingness to pay for carbon offset certification and co-benefits among (high-)flying young adults in the UK," Energy Policy, Elsevier, vol. 37(4), pages 1372-1381, April.

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