IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v33y2011i1p293-314.html
   My bibliography  Save this article

Can unbiased be tighter? Assessment of methods to reduce the bias-variance trade-off in WTP estimation

Author

Listed:
  • Genius, Margarita
  • Strazzera, Elisabetta

Abstract

This paper aims at verifying the claim, appeared in recent literature, that it is possible to control for response bias associated to the double bound elicitation method, while keeping gains in efficiency of the WTP estimates. Results from a Monte Carlo analysis lead, in general, to reject the claim; but when initial bids are not correctly chosen, the gains in efficiency are confirmed. An empirical application dealing with WTP estimation for drinking water quality improvements illustrates a case where a flexible modeling approach based on Copula distributions allows relevant gains with respect to the Single Bound estimator.

Suggested Citation

  • Genius, Margarita & Strazzera, Elisabetta, 2011. "Can unbiased be tighter? Assessment of methods to reduce the bias-variance trade-off in WTP estimation," Resource and Energy Economics, Elsevier, vol. 33(1), pages 293-314, January.
  • Handle: RePEc:eee:resene:v:33:y:2011:i:1:p:293-314
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928-7655(10)00058-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. DeShazo, J. R., 2002. "Designing Transactions without Framing Effects in Iterative Question Formats," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 360-385, May.
    2. Burton, Anthony C. & Carson, Katherine S. & Chilton, Susan M. & Hutchinson, W. George, 2003. "An experimental investigation of explanations for inconsistencies in responses to second offers in double referenda," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 472-489, November.
    3. M. Genius & E. Strazzera, 2005. "Modeling Elicitation effects in contingent valuation studies: a Monte Carlo Analysis of the bivariate approach," Working Paper CRENoS 200502, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Alberini Anna, 1995. "Efficiency vs Bias of Willingness-to-Pay Estimates: Bivariate and Interval-Data Models," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 169-180, September.
    5. David Aadland & Arthur Caplan & Owen Phillips, 2007. "A Bayesian examination of information and uncertainty in contingent valuation," Journal of Risk and Uncertainty, Springer, vol. 35(2), pages 149-178, October.
    6. Richard Carson & Nicholas Flores & Norman Meade, 2001. "Contingent Valuation: Controversies and Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(2), pages 173-210, June.
    7. Herriges, Joseph A. & Shogren, Jason F., 1996. "Starting Point Bias in Dichotomous Choice Valuation with Follow-Up Questioning," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 112-131, January.
    8. Emmanuel Flachaire & Guillaume Hollard, 2006. "Controlling Starting-Point Bias in Double-Bounded Contingent Valuation Surveys," Land Economics, University of Wisconsin Press, vol. 82(1), pages 103-111.
    9. Aprahamian, Frederic & Chanel, Olivier & Luchini, Stephane, 2007. "AJAE Appendix: Modeling Starting Point Bias as Unobserved Heterogeneity in Contingent Valuation Surveys: An Application to Air Pollution," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 89(2), pages 1-5, May.
    10. John C. Whitehead, 2002. "Incentive Incompatibility and Starting-Point Bias in Iterative Valuation Questions," Land Economics, University of Wisconsin Press, vol. 78(2), pages 285-297.
    11. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
    12. Cameron Trudy Ann & Quiggin John, 1994. "Estimation Using Contingent Valuation Data from a Dichotomous Choice with Follow-Up Questionnaire," Journal of Environmental Economics and Management, Elsevier, vol. 27(3), pages 218-234, November.
    13. Anna Alberini, 1995. "Testing Willingness-to-Pay Models of Discrete Choice Contingent Valuation Survey Data," Land Economics, University of Wisconsin Press, vol. 71(1), pages 83-95.
    14. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    15. Clarke, Kevin A., 2007. "A Simple Distribution-Free Test for Nonnested Model Selection," Political Analysis, Cambridge University Press, vol. 15(3), pages 347-363, July.
    16. Hanemann, W. Michael & Kanninen, Barbara, 1996. "The Statistical Analysis Of Discrete-Response Cv Data," CUDARE Working Papers 25022, University of California, Berkeley, Department of Agricultural and Resource Economics.
    17. Michael Hanemann & John Loomis & Barbara Kanninen, 1991. "Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1255-1263.
    18. Donald M. McLeod & Olvar Bergland, 1999. "Willingness-to-Pay Estimates Using the Double-Bounded Dichotomous-Choice Contingent Valuation Format: A Test for Validity and Precision in a Bayesian Framework," Land Economics, University of Wisconsin Press, vol. 75(1), pages 115-125.
    19. Elisabetta Strazzera & Margarita Genius & Riccardo Scarpa & George Hutchinson, 2003. "The Effect of Protest Votes on the Estimates of WTP for Use Values of Recreational Sites," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(4), pages 461-476, August.
    20. Genius, Margarita & Strazzera, Elisabetta, 2002. "A note about model selection and tests for non-nested contingent valuation models," Economics Letters, Elsevier, vol. 74(3), pages 363-370, February.
    21. Kanninen Barbara J., 1995. "Bias in Discrete Response Contingent Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 114-125, January.
    22. Aprahamian, Frederic & Chanel, Olivier & Luchini, Stephane, 2008. "Heterogeneous anchoring and the shift effect in iterative valuation questions," Resource and Energy Economics, Elsevier, vol. 30(1), pages 12-20, January.
    23. Elisabetta Strazzera & Riccardo Scarpa & Pinuccia Calia & Guy Garrod & Kenneth Willis, 2003. "Modelling zero values and protest responses in contingent valuation surveys," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 133-138.
    24. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    25. Pinuccia Calia & Elisabetta Strazzera, 2000. "Bias and efficiency of single versus double bound models for contingent valuation studies: a Monte Carlo analysis," Applied Economics, Taylor & Francis Journals, vol. 32(10), pages 1329-1336.
    26. Timothy C. Haab, "undated". "Analyzing Multiple Question Contingent Valuation Surveys: A Reconsideration of the Bivariate Probit," Working Papers 9711, East Carolina University, Department of Economics.
    27. Elisabetta Strazzera & Margarita Genius & Riccardo Scarpa & George Hutchinson, "undated". "The Effect Of Protest Votes On The Estimates Of Willingness To Pay For Use Values Of Recreational Sites," Working Papers 0106, University of Crete, Department of Economics.
    28. Olivier Chanel & Stéphane Luchini, 2007. "Modeling Starting Point Bias as Unobserved Heterogeneity in Contingent Valuation Surveys: An Application to Air Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 533-547.
    29. Riccardo Scarpa & Ian Bateman, 2000. "Efficiency Gains Afforded by Improved Bid Design versus Follow-up Valuation Questions in Discrete-Choice CV Studies," Land Economics, University of Wisconsin Press, vol. 76(2), pages 299-311.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schwarzinger, Michaël & Carrat, Fabrice & Luchini, Stéphane, 2009. ""If you have the flu symptoms, your asymptomatic spouse may better answer the willingness-to-pay question": Evidence from a double-bounded dichotomous choice model with heterogeneous anchori," Journal of Health Economics, Elsevier, vol. 28(4), pages 873-884, July.
    2. Frédéric Salladarré & Dorothée Brécard & Sterenn Lucas & Pierrick Ollivier, 2016. "Are French consumers ready to pay a premium for eco-labeled seafood products? A contingent valuation estimation with heterogeneous anchoring," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 247-258, March.
    3. Araña, Jorge E. & León, Carmelo J., 2008. "Do emotions matter? Coherent preferences under anchoring and emotional effects," Ecological Economics, Elsevier, vol. 66(4), pages 700-711, July.
    4. Gelo, Dambala & Koch, Steven F., 2015. "Contingent valuation of community forestry programs in Ethiopia: Controlling for preference anomalies in double-bounded CVM," Ecological Economics, Elsevier, vol. 114(C), pages 79-89.
    5. Marcella Veronesi & Anna Alberini & Joseph Cooper, 2011. "Implications of Bid Design and Willingness-To-Pay Distribution for Starting Point Bias in Double-Bounded Dichotomous Choice Contingent Valuation Surveys," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(2), pages 199-215, June.
    6. Michaël Schwarzinger & Fabrice Carrat & Stéphane Luchini, 2009. ""If you have the flu symptoms, your asymptomatic spouse may better answer the willingness-to-pay question". Evidence from a double-bounded dichotomous choice model with heterogeneous anchori," Post-Print inserm-00636179, HAL.
    7. M. Genius & E. Strazzera, 2005. "Modeling Elicitation effects in contingent valuation studies: a Monte Carlo Analysis of the bivariate approach," Working Paper CRENoS 200502, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    8. Watson, Verity & Ryan, Mandy, 2007. "Exploring preference anomalies in double bounded contingent valuation," Journal of Health Economics, Elsevier, vol. 26(3), pages 463-482, May.
    9. Day, Brett & Pinto Prades, Jose-Luis, 2010. "Ordering anomalies in choice experiments," Journal of Environmental Economics and Management, Elsevier, vol. 59(3), pages 271-285, May.
    10. Aravena, Claudia & Hutchinson, W. George & Carlsson, Fredrik & Matthews, David I, 2015. "Testing preference formation in learning design contingent valuation (LDCV) using advanced information and repetitivetreatments," Working Papers in Economics 619, University of Gothenburg, Department of Economics.
    11. Neil Powe & Kenneth Willis & Guy Garrod, 2006. "Difficulties in valuing street light improvement: trust, surprise and bound effects," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 371-381.
    12. Kang, Heechan & Haab, Timothy C. & Interis, Matthew G., 2013. "Identifying inconsistent responses in dichotomous choice contingent valuation with follow-up questions," Resource and Energy Economics, Elsevier, vol. 35(3), pages 396-411.
    13. Aravena, Claudia & Hutchinson, W. George & Longo, Alberto, 2012. "Environmental pricing of externalities from different sources of electricity generation in Chile," Energy Economics, Elsevier, vol. 34(4), pages 1214-1225.
    14. Satoshi Yamazaki & Steven Rust & Sarah Jennings & Jeremy Lyle & Sven Frijlink, 2013. "Valuing recreational fishing in Tasmania and assessment of response bias in contingent valuation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(2), pages 193-213, April.
    15. Luchini, Stéphane & Watson, Verity, 2013. "Uncertainty and framing in a valuation task," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 204-214.
    16. Dambala Gelo & Steven F. Koch, 2011. "Contingent Valuation of Community Forestry Programs in Ethiopia: Observing Preference Anomalies in Double-Bounded CVM," Working Papers 201124, University of Pretoria, Department of Economics.
    17. Luchini, Stéphane & Watson, Verity, 2013. "Uncertainty and framing in a valuation task," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 204-214.
    18. Flachaire, Emmanuel & Hollard, Guillaume, 2007. "Starting point bias and respondent uncertainty in dichotomous choice contingent valuation surveys," Resource and Energy Economics, Elsevier, vol. 29(3), pages 183-194, September.
    19. DeShazo, J. R., 2002. "Designing Transactions without Framing Effects in Iterative Question Formats," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 360-385, May.
    20. Robert J. Johnston & Kevin J. Boyle & Wiktor (Vic) Adamowicz & Jeff Bennett & Roy Brouwer & Trudy Ann Cameron & W. Michael Hanemann & Nick Hanley & Mandy Ryan & Riccardo Scarpa & Roger Tourangeau & Ch, 2017. "Contemporary Guidance for Stated Preference Studies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(2), pages 319-405.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:33:y:2011:i:1:p:293-314. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.