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Actual averting expenditure versus stated willingness to pay

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  • Pei-Ing Wu
  • Chu-Li Huang

Abstract

The purpose of this study is to perform a complete comparison of actual averting expenditure and stated willingness to pay measures, and to determine if the averting expenditure is a lower bound of the willingness to pay measured from contingent valuation experiment as suggested by literature. In addition to the single value comparison, Bootstrap, Krinsky and Robb, Jackknife, and Cameron are four simulation methods used to calculate confidence intervals for response function. Sample sizes of 100, 200, and 1000 are simulated 100 and 200 times respectively. A set of data with 540 households from a contingent policy referendum survey is employed for our purpose. Under a specific level of BOD improvement, a one-to-one single mean value comparison of the actual averting expenditure is greater than the mean willingness to pay from utility difference model. The empirical results are consistent with the theoretical expectation for expenditure difference that averting expenditure is a lower bound of willingness to pay generated from the contingent valuation method. A confidence interval, which contains the true mean willingness to pay at least 90% of the times, includes the actual averting expenditure as a lower bound of the mean willingness to pay as theory predicts.

Suggested Citation

  • Pei-Ing Wu & Chu-Li Huang, 2001. "Actual averting expenditure versus stated willingness to pay," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 277-283.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:2:p:277-283
    DOI: 10.1080/00036840122947
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    Cited by:

    1. Mikhail Miklyaev & Glenn P. Jenkins & Precious P. Adeshina, 2022. "Ex-Post Evaluation of The Algerian SWRO Desalination PPP Program," Development Discussion Papers 2022-14, JDI Executive Programs.
    2. Bruno Lanz & Allan Provins, 2014. "The demand for tap water quality: Survey evidence on water hardness and aesthetic quality," CIES Research Paper series 23-2014, Centre for International Environmental Studies, The Graduate Institute.
    3. Arif Yurtsev & Glenn P. Jenkins, 2019. "Assessment of the Impact on Household Welfare of Pressurized Potable Water Supply in Northern Cyprus," Development Discussion Papers 2019-03, JDI Executive Programs.
    4. M. R. Bhatia & J. A. Fox-Rushby, 2003. "Validity of Willingness to Pay: hypothetical versus actual payment," Applied Economics Letters, Taylor & Francis Journals, vol. 10(12), pages 737-740.
    5. Das, Saudamini & Nepal, Mani & Rai, Rajesh K. & Bhatta, Laxmi D. & Khadayat, Madan S., 2019. "Valuing water provisioning service of Broadleaf and Chir Pine forests in the Himalayan region," Forest Policy and Economics, Elsevier, vol. 105(C), pages 40-51.
    6. Patrick Lloyd-Smith & Craig Schram & Wiktor Adamowicz & Diane Dupont, 2018. "Endogeneity of Risk Perceptions in Averting Behavior Models," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 217-246, February.
    7. Rajapakshe, Sisira & Termansen, Mette & Paavola, Jouni, 2022. "Valuing Water Service Improvements through Revealed Preference: Averting Behaviour Method," MPRA Paper 115623, University Library of Munich, Germany.
    8. John Whitehead, 2006. "A comparison of contingent valuation method and random utility model estimates of the value of avoiding reductions in king mackerel bag limits," Applied Economics, Taylor & Francis Journals, vol. 38(15), pages 1725-1735.
    9. Jason F. Shogren & Tommy Stamland, 2005. "Self-Protection and Value of Statistical Life Estimation," Land Economics, University of Wisconsin Press, vol. 81(1).
    10. Urama, Kevin C. & Hodge, Ian D., 2006. "Are stated preferences convergent with revealed preferences? Empirical evidence from Nigeria," Ecological Economics, Elsevier, vol. 59(1), pages 24-37, August.
    11. Bernal García, Juan Jesús & Martínez Maria-Dolores, Soledad María & Sánchez García, Juan Francisco, 2006. "Study of the potentiality of the electronic commerce in the Region of Murcia by means of a model of logistic regression/Estudio de la Potencialidad del Comercio Electrónico en la Región de Murcia medi," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 24, pages 499-529, Abril.
    12. Orgill-Meyer, Jennifer & Jeuland, Marc & Albert, Jeff & Cutler, Nathan, 2018. "Comparing Contingent Valuation and Averting Expenditure Estimates of the Costs of Irregular Water Supply," Ecological Economics, Elsevier, vol. 146(C), pages 250-264.

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