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Temporal insensitivity of willingness to pay and implied discount rates

  • Kim, Soo-Il
  • Haab, Timothy C.
Registered author(s):

A number of studies have defined and tested the temporal sensitivity of willingness to pay to payment schemes and the resulting implied discount rates for environmental projects. We demonstrate that those studies have imposed restrictive assumptions on the structure of the willingness to pay function and the underlying decision process. We investigate the temporal sensitivity of willingness to pay using a new temporal willingness to pay function applied to a proposed oyster reef restoration program. We find that (1) holding the length of the project constant, the temporal willingness to pay for the project is the same across different payment schemes, (2) temporal willingness to pay does not vary significantly across projects of varying lengths, and (3) estimated discount rates are low relative to previous studies, but vary significantly across payment schemes and project lengths.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 2 (May)
Pages: 89-102

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Handle: RePEc:eee:resene:v:31:y:2009:i:2:p:89-102
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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  1. Richard T. Carson & W. Michael Hanemann, & Raymond J. Kopp & Jon A. Krosnick & Robert C. Mitchell & Stanley Presser & Paul A. Rudd & V. Kerry Smith & Michael Conaway & Kerry Martin, 1997. "Temporal Reliability of Estimates from Contingent Valuation," Land Economics, University of Wisconsin Press, vol. 73(2), pages 151-163.
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  8. Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, . "Are Hypothetical Referenda Incentive Compatible? A Comment," Working Papers 9708, East Carolina University, Department of Economics.
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  15. Kim, Sooil & Haab, Timothy C., 2004. "Revisiting Bid Design Issues In Contingent Valuation," 2004 Annual meeting, August 1-4, Denver, CO 20162, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  16. W. Michael Hanemann, 1994. "Valuing the Environment through Contingent Valuation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 19-43, Fall.
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