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Finding Sensitivity to Scope in Nonmarket Valuation

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  • Juha Siikamäki
  • Douglas M. Larson

Abstract

Data limitations frequently prevent using actual consumer behavior in determining natural resource values, so stated preference methods are used. Whether value estimates show sensitivity to the scope of resource valued is a key test for their validity, which several studies fail. Developing a correlated panel mixed logit model of households' water quality valuations in California, we show that false negatives in scope tests can result when individual preference variation and correlation are ignored and split‐sample comparisons are used. Monte Carlo simulations further demonstrate potentially prevalent false rejections of scope sensitivity even when within‐subject comparisons of willingness to pay portray strong scope sensitivity. Copyright © 2013 John Wiley & Sons, Ltd.

Suggested Citation

  • Juha Siikamäki & Douglas M. Larson, 2015. "Finding Sensitivity to Scope in Nonmarket Valuation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 333-349, March.
    • Handle: RePEc:wly:japmet:v:30:y:2015:i:2:p:333-349
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    Cited by:

    1. Ana Faria Lopes & Gorm Kipperberg, 2020. "Diagnosing Insensitivity to Scope in Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(1), pages 191-216, September.
    2. Brad R. Humphreys & Bruce K. Johnson & John C. Whitehead, 2020. "Validity and reliability of contingent valuation and life satisfaction measures of welfare: An application to the value of national Olympic success," Southern Economic Journal, John Wiley & Sons, vol. 87(1), pages 316-330, July.
    3. Peter A. Groothuis & Tanga M. Mohr & John C. Whitehead & Kristan Cockerill & William P. Anderson, Jr. & Chuanhui Gu, 2020. "Measuring the Direct and Indirect Effect of Scientific Information On Valuing Stormwater Management Programs: A Hybrid Choice Model," Working Papers 20-02, Department of Economics, Appalachian State University.
    4. John C. Whitehead & O. Ashton Morgan & William L. Huth & Gregory S. Martin & Richard Sjolander, 2020. "Altruistic and Private Values For Saving Lives With an Oyster Consumption Safety Program," Risk Analysis, John Wiley & Sons, vol. 40(11), pages 2413-2426, November.

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