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How to Deal with Protest Bids and Preference for the Status Quo in Choice Experiments ?

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  • Julie Poirier

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    (CREST)

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    Abstract

    This paper deals with the protest bids issue in choice experiments. In the context of the Water Framework Directive, we examined local residents’ preferences for water quality improvements at a specific river basin in France. We used the choice experiment method with site-specific attributes referring to the four sites that compose our basin. We first estimated a random parameters logit model in order to take into account heterogeneity of preferences. We found positive willingness-to-pay for improvements in water quality. Moreover we observed that a significant proportion of respondents always chose the status quo scenario (which referred to the current management regime and was associated with a zero price) irrespective of the choice set she was presented. Status quo responses are considered as being zero bids and may be categorized into two types: true zero bids, where the respondent really places a zero value on the good, and protest bids, where the respondent states a zero willingness-topay even though her true value for the good is positive. We excluded protest bids from the analysis and re-estimated our random parameters logit model. Results showed that protest bids do affect the outcome. In order to take into account the existence of the two types of zero bids when estimating willingness-to-pay, we then proposed a cross-nested logit model. Implicit prices obtained from this model estimation are larger than those obtained from the random parameters logit model estimation. As a result, the cross-nested logit model allows taking into consideration the peculiarity of protest behaviors

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    Bibliographic Info

    Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-02.

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    Length: 29
    Date of creation: Jan 2012
    Date of revision:
    Handle: RePEc:crs:wpaper:2012-02

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    Related research

    Keywords: Choice experiments; Cross-nested logit model; Protest bids; Water Framework Directive; Water quality;

    This paper has been announced in the following NEP Reports:

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    1. Kosz, Michael, 1996. "Valuing riverside wetlands: the case of the "Donau-Auen" national park," Ecological Economics, Elsevier, vol. 16(2), pages 109-127, February.
    2. Wen, Chieh-Hua & Koppelman, Frank S., 2001. "The generalized nested logit model," Transportation Research Part B: Methodological, Elsevier, vol. 35(7), pages 627-641, August.
    3. Carlsson, Fredrik & Martinsson, Peter, 2001. "Do Hypothetical and Actual Marginal Willingness to Pay Differ in Choice Experiments?: Application to the Valuation of the Environment," Journal of Environmental Economics and Management, Elsevier, vol. 41(2), pages 179-192, March.
    4. Abbe, E. & Bierlaire, M. & Toledo, T., 2007. "Normalization and correlation of cross-nested logit models," Transportation Research Part B: Methodological, Elsevier, vol. 41(7), pages 795-808, August.
    5. Farber, Stephen & Griner, Brian, 2000. "Valuing watershed quality improvements using conjoint analysis," Ecological Economics, Elsevier, vol. 34(1), pages 63-76, July.
    6. Wiktor Adamowicz & Peter Boxall & Michael Williams & Jordan Louviere, 1998. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 64-75.
    7. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
    8. Arne Risa Hole, 2007. "A comparison of approaches to estimating confidence intervals for willingness to pay measures," Health Economics, John Wiley & Sons, Ltd., vol. 16(8), pages 827-840.
    9. Blamey, Russell K. & Gordon, Jenny & Chapman, Ross, 1999. "Choice modelling: assessing the environmental values of water supply options," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(3), September.
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