IDEAS home Printed from https://ideas.repec.org/a/kap/pubcho/v49y1986i1p47-68.html
   My bibliography  Save this article

The application of laboratory experimental economics to the contingent valuation of public goods

Author

Listed:
  • Don Coursey
  • William Schulze

Abstract

We have implicitly argued in the last section that a dynamic iterative survey mechanism may well need to be employed in the design of contingent valuation survey instruments in order to improve the accuracy of responses. Furthermore, due to the current inaccuracy of hedonic and travel cost approaches for valuing public goods, the least cost method, in our view, for establishing anchor or true individual values for testing alternative survey instruments is to use laboratory experiments. The objective of these experiments should be the development of the most simple survey design which gives accurate responses subject to the budget of the investigator. Is a complex iterative voting procedure required? How fast will such a procedure converge to ‘true’ values? What is the effect on incentives of relaxing the unanimity voting feature for large groups? All of these operational questions can at least qualitatively be answered in an experimental laboratory setting. This approach would allow rapid resolution of a number of problems which have developed in the application of the contingent valuation approach. First, the large difference between economic measures of willingness to accept and willingness to pay may be greatly reduced by application of demand revealing mechanisms. Any remaining difference between the two measures might then be properly attributed to psychological, ethical or other complicating factors. Second, the consistently large differences between the iterative bidding and payment card measures of willingness to pay suggests that one of the procedures might be more accurate than the other. Laboratory experimentation should be able to quickly identify the superior procedure. Third, contingent valuation studies which involve uncertainty have not proven successful. In a study of the willingness to pay to contain toxic wastes undertaken by Cummings and reported on in Schulze et al. (1983) nearly half of the respondents were willing to contribute the same amount of money for 50 percent odds of containment as for 100 percent odds of containment. Does this result indicate a failure of the expected utility hypothesis or a failure to perceive or comprehend probabilities by a large sub-sample of individuals? Or, is the survey at fault? Again the least cost approach for resolving these questions is likely to be a laboratory setting. Finally, individuals may have severe perception problems with the timing and method of payment used to collect bids for public goods. Schulze et al. (1983) report on a large divergence in the value of preserving visibility for visitors at the Grand Canyon using monthly payments in the form of higher electric utility bills to collect payment as compared to collecting higher daily entrance fees. Note that the first method hypothetically collects a regular payment on a monthly basis while the second hypothetically collects payments only if respondents visit the Grand Canyon. The first method implied an overall larger total benefit of preserving visibility than the second. Again, laboratory experiments could readily determine the relative accuracy of alternative temporal payment mechanisms. Copyright Martinus Nijhoff Publishers 1986

Suggested Citation

  • Don Coursey & William Schulze, 1986. "The application of laboratory experimental economics to the contingent valuation of public goods," Public Choice, Springer, vol. 49(1), pages 47-68, January.
  • Handle: RePEc:kap:pubcho:v:49:y:1986:i:1:p:47-68
    DOI: 10.1007/BF00163530
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF00163530
    Download Restriction: Access to full text is restricted to subscribers.

    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. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
    2. Bohm, Peter, 1972. "Estimating demand for public goods: An experiment," European Economic Review, Elsevier, vol. 3(2), pages 111-130.
    3. Tideman, T Nicolaus & Tullock, Gordon, 1976. "A New and Superior Process for Making Social Choices," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1145-1159, December.
    4. Ferejohn, John A & Noll, Roger G, 1976. "An Experimental Market for Public Goods: The PBS Station Program Cooperative," American Economic Review, American Economic Association, vol. 66(2), pages 267-273, May.
    5. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    6. David Brookshire & Thomas Crocker, 1981. "The advantages of contingent valuation methods for benefit-cost analysis," Public Choice, Springer, vol. 36(2), pages 235-252, January.
    7. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    8. William D. Schulze & Ralph C. d'Arge & David S. Brookshire, 1981. "Valuing Environmental Commodities: Some Recent Experiments," Land Economics, University of Wisconsin Press, vol. 57(2), pages 151-172.
    9. Peter Bohm, 1972. "Estimating the demand for public goods: An experiment," Framed Field Experiments 00126, The Field Experiments Website.
    10. Brown, James N & Rosen, Harvey S, 1982. "On the Estimation of Structural Hedonic Price Models," Econometrica, Econometric Society, vol. 50(3), pages 765-768, May.
    11. Smith, Vernon L, 1979. " An Experimental Comparison of Three Public Good Decision Mechanisms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 198-215.
    12. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    13. Martin Loeb, 1977. "Alternative versions of the demand-revealing process," Public Choice, Springer, vol. 29(2), pages 15-26, March.
    14. Hori, Hajime, 1975. "Revealed Preference for Public Goods," American Economic Review, American Economic Association, vol. 65(5), pages 978-991, December.
    15. Brookshire, David S, et al, 1982. "Valuing Public Goods: A Comparison of Survey and Hedonic Approaches," American Economic Review, American Economic Association, vol. 72(1), pages 165-177, March.
    16. Richard Engelbrecht-Wiggans, 1980. "State of the Art---Auctions and Bidding Models: A Survey," Management Science, INFORMS, vol. 26(2), pages 119-142, February.
    17. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 1-22, January.
    18. Rowe, Robert D. & D'Arge, Ralph C. & Brookshire, David S., 1980. "An experiment on the economic value of visibility," Journal of Environmental Economics and Management, Elsevier, vol. 7(1), pages 1-19, March.
    19. Bradford, David F, 1970. "Benefit-Cost Analysis and Demand Curves for Public Goods," Kyklos, Wiley Blackwell, vol. 23(4), pages 775-791.
    20. Randall, Alan & Ives, Berry & Eastman, Clyde, 1974. "Bidding games for valuation of aesthetic environmental improvements," Journal of Environmental Economics and Management, Elsevier, vol. 1(2), pages 132-149, August.
    21. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    22. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
    23. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    24. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
    25. Smith, Vernon L, 1977. "The Principle of Unanimity and Voluntary Consent in Social Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1125-1139, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:kap:enreec:v:67:y:2017:i:3:d:10.1007_s10640-016-0023-5 is not listed on IDEAS
    2. Nicolas Jacquemet & Alexander James & Stéphane Luchini & Jason F. Shogren, 2017. "Referenda Under Oath," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 479-504, July.
    3. White, Karen, 2010. "Measuring Livability in Transportation Infrastructure Investments," 51st Annual Transportation Research Forum, Arlington, Virginia, March 11-13, 2010 207267, Transportation Research Forum.
    4. Ledyard, John O., "undated". "Public Goods: A Survey of Experimental Research," Working Papers 861, California Institute of Technology, Division of the Humanities and Social Sciences.
    5. Jason Shogren, 2006. "Valuation in the Lab," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(1), pages 163-172, May.
    6. Robin Gregory & Lita Furby, 1987. "Auctions, experiments and contingent valuation," Public Choice, Springer, vol. 55(3), pages 273-289, October.
    7. Don Coursey, 1987. "Markets and the measurement of value," Public Choice, Springer, vol. 55(3), pages 291-297, October.
    8. Hans Groot & Evert Pommer, 1989. "The stability of stated preferences for public goods: Evidence from recent budget games," Public Choice, Springer, vol. 60(2), pages 123-132, February.

    More about this item

    Statistics

    Access and download statistics

    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:kap:pubcho:v:49:y:1986:i:1:p:47-68. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.