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Prior Information, General Information, and Specific Information in the Contingent Valuation of Environmental Risks: The Case of Nitrates in Groundwater

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  • Poe, Gregory L.
  • Bishop, Richard C.

Abstract

Information, or lack thereof, is an important input in value formation and the distribution of contingent values. Although most conceptualizations of the contingent valuation process stress that information provision should be 'adequate,' very little empirical research has been devoted to assessing the effects of different information flows on contingent values and to establishing a standard of information adequacy for contingent valuation studies. The need for such research is particularly cogent for valuing the benefits of reducing environmental risks, a non-market good which is increasingly being valued with the contingent valuation method. Using nitrates in groundwater as a case study, this paper evaluates and compares health risk perceptions and the distribution of contingent values for groundwater protection associated with three different levels of information provision. In the first level, no information about nitrates or personal exposure was provided to the participants, an approach which reflects the philosophy that values should be based on prior information and preferences. The second information level provided participants with general information about the health effects of nitrates, sources of nitrate contamination, government standards for nitrates, indicators of the distribution of nitrate levels in local wells, and opportunities for averting behavior. The third level of information flow provided the general information packet along with specific information about actual nitrate levels found in participants' wells. The primary results of this research are that individuals need afull-information set that includes both general and specific information to identify their own best interests with respect to groundwater protection programs, and that the provision of general information alone appears to lead to biased estimates of willingness to pay for groundwater protection. These results establish a full-information standard for future contingent valuation research of groundwater protection.

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Bibliographic Info

Paper provided by Cornell University, Department of Applied Economics and Management in its series Staff Papers with number 121335.

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Date of creation: Jul 1992
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Handle: RePEc:ags:cudasp:121335

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Keywords: Resource /Energy Economics and Policy;

References

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  1. Thomas D. Crocker & Bruce A. Forster & Jason F. Shogren, 1991. "Valuing Potential Groundwater Protection Benefits," Center for Agricultural and Rural Development (CARD) Publications 91-wp71, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Grether, David M. & Wilde, Louis L., 1983. "Consumer choice and information : New experimental evidence," Information Economics and Policy, Elsevier, vol. 1(2), pages 115-144.
  3. Poe, Gregory L. & Lossin, Eric K. & Welsh, Michael P., 1993. "A Convolutions Approach To Measuring The Differences In Simulated Distributions: Application To Dichotomous Choice Contingent Valuation," Working Papers 128027, Cornell University, Department of Applied Economics and Management.
  4. V. Kerry Smith & William H. Desvousges & F. Reed Johnson & Ann Fisher, 1990. "Can public information programs affect risk perceptions?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 41-59.
  5. Viscusi, W Kip & O'Connor, Charles J, 1984. "Adaptive Responses to Chemical Labeling: Are Workers Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 74(5), pages 942-56, December.
  6. Bergstrom, John C. & Stoll, John R., 1989. "Application Of Experimentatal Economics Concepts And Precepts To Cvm Field Survey Procedures," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), July.
  7. Edwards, Steven F., 1988. "Option prices for groundwater protection," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 475-487, December.
  8. John W. Duffield & David A. Patterson, 1991. "Inference and Optimal Design for a Welfare Measure in Dichotomous Choice Contingent Valuation," Land Economics, University of Wisconsin Press, vol. 67(2), pages 225-239.
  9. Smith, V Kerry & Johnson, F Reed, 1988. "How Do Risk Perceptions Respond to Information? The Case of Radon," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 1-8, February.
  10. Fischhoff, Baruch & Furby, Lita, 1988. " Measuring Values: A Conceptual Framework for Interpreting Transactions with Special Reference to Contingent Valuation of Visibility," Journal of Risk and Uncertainty, Springer, vol. 1(2), pages 147-84, June.
  11. Shogren, Jason F. & Crocker, Thomas D., 1991. "Risk, self-protection, and ex ante economic value," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 1-15, January.
  12. Karl C. Samples & John A. Dixon & KMarcia M. Gowen, 1986. "Information Disclosure and Endangered Species Valuation," Land Economics, University of Wisconsin Press, vol. 62(3), pages 306-312.
  13. Quiggin, John, 1992. "Risk, self-protection and ex ante economic value--some positive results," Journal of Environmental Economics and Management, Elsevier, vol. 23(1), pages 40-53, July.
  14. Kevin J. Boyle, 1989. "Commodity Specification and the Framing of Contingent-Valuation Questions," Land Economics, University of Wisconsin Press, vol. 65(1), pages 57-63.
  15. Richard C. Bishop & Michael P. Welsh, 1992. "Existence Values in Benefit-Cost Analysis and Damage Assessment," Land Economics, University of Wisconsin Press, vol. 68(4), pages 405-417.
  16. Hoehn, John P. & Randall, Alan, 1987. "A satisfactory benefit cost indicator from contingent valuation," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 226-247, September.
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