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Toward Improved Economic Analysis Using Contingent Valuation: Some Methodological Considerations Applied To River Toxics And Dam Removal

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  • Hitzhusen, Frederick J.
  • Abdul-Mohsen, Ashraf
  • Kruse, Sarah
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    Abstract

    This paper addresses conceptually and empirically some of the biases commonly associated with contingent valuation (CV) elicitation of willingness to pay (WTP) values for non-market goods and services. More specifically, the study focuses on testing for scope, context, and sequence effects in CV mail surveys as well as the assumption of well-defined preferences in mail questionnaires and how this assumption might bias WTP estimates. Our results suggest that the absence of scope effects in the some CV mail surveys might be a result of the complexity or multidimensional aspect of the policy in question (i.e. dredging with and without dam removal) and the assumption that increases in scale of the public good are easier to be comprehended and then translated into dollar values than increases in scope by the average respondent. Moreover, results of the initial mail survey suggest that individuals may not have well defined preferences for goods (i.e. dam removal) with which they are not familiar or experienced. Pre-testing of the structured elicitation groups suggests that this alternative elicitation format based on a philosophy of constructive preferences may lead to more thoughtful and rational WTP values.

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    File URL: http://purl.umn.edu/20326
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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20326.

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    Date of creation: 2004
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    Handle: RePEc:ags:aaea04:20326

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    Keywords: Research Methods/ Statistical Methods;

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    1. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
    2. Hoehn, John P & Randall, Alan, 1989. "Too Many Proposals Pass the Benefit Cost Test," American Economic Review, American Economic Association, vol. 79(3), pages 544-51, June.
    3. Payne, John W, et al, 2000. " Valuation of Multiple Environmental Programs," Journal of Risk and Uncertainty, Springer, vol. 21(1), pages 95-115, July.
    4. Smith, V. Kerry, 1992. "Arbitrary values, good causes, and premature verdicts," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 71-89, January.
    5. Payne, John W & Bettman, James R & Schkade, David A, 1999. "Measuring Constructed Preferences: Towards a Building Code," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 243-70, December.
    6. Fischhoff, Baruch & Welch, Ned & Fredrick, Shane, 1999. "Construal Processes in Preference Assessment," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 139-64, December.
    7. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
    8. Loomis John & Lockwood Michael & DeLacy Terry, 1993. "Some Empirical Evidence on Embedding Effects in Contingent Valuation of Forest Protection," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 45-55, July.
    9. Kahnemant, Daniel & Knetsch, Jack L., 1992. "Contingent valuation and the value of public goods: Reply," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 90-94, January.
    10. Carson Richard T. & Mitchell Robert Cameron, 1995. "Sequencing and Nesting in Contingent Valuation Surveys," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 155-173, March.
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