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Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations

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  • Seung-Hoon Yoo
  • Seung-Jun Kwak
  • Tai-Yoo Kim

Abstract

Modelling household behaviour with the data from dichotomous choice contingent valuation (DCCV) surveys is often complicated by zero willingness to pay (WTP) responses in the sample. To deal with the zero responses, a two-equation model is considered, which incorporates a two-level decision structure, a decision on whether to participate in having WTP and a decision on the WTP amount conditional on deciding to participate, and two separate stochastic processes that determine the probability and conditional level of WTP are featured. The model is empirically applied to household survey data, in which the DCCV questions concerned the benefits of air quality improvement in Korea. To put the issue of the two-equation model in perspective, this paper also experiments with economic and econometric specifications: utility theoretic restriction and heteroscedasticity. It is shown how failure to allow for the restriction distorts aggregate benefit estimates and the existence of heteroscedasticity in error term is found.

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  • Seung-Hoon Yoo & Seung-Jun Kwak & Tai-Yoo Kim, 2001. "Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 523-529.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:523-529
    DOI: 10.1080/00036840122117
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    References listed on IDEAS

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    3. Owusu, Victor & Owusu, Michael Anifori, 2010. "Measuring Market Potential for Fresh Organic Fruit and Vegetable in Ghana," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95955, African Association of Agricultural Economists (AAAE).
    4. Raymond Y.T. Yeung & Gabriel M. Leung & Sarah M. McGhee & Janice M. Johnston, 2004. "Waiting time and doctor shopping in a mixed medical economy," Health Economics, John Wiley & Sons, Ltd., vol. 13(11), pages 1137-1144, November.
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    7. Halkos, George E. & Jones, Nikoleta, 2012. "Modeling the effect of social factors on improving biodiversity protection," Ecological Economics, Elsevier, vol. 78(C), pages 90-99.
    8. Leung, Gabriel Matthew & Yeung, Raymond Yue Ting & Wong, Irene Oi Ling & Castan-Cameo, Susana & Johnston, Janice Mary, 2006. "Time costs of waiting, doctor-shopping and private-public sector imbalance: Microdata evidence from Hong Kong," Health Policy, Elsevier, vol. 76(1), pages 1-12, March.
    9. Polyzou, E. & Jones, N. & Evangelinos, K.I. & Halvadakis, C.P., 2011. "Willingness to pay for drinking water quality improvement and the influence of social capital," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 74-80, February.
    10. 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.
    11. Halkos, George & Jones, Nikoleta, 2011. "Social factors influencing the decision to pay for the protection of biodiversity: A case study in two national parks of Northern Greece," MPRA Paper 34581, University Library of Munich, Germany.
    12. Lee, Sang Hun & Kang, Hyun Gook, 2016. "Integrated framework for the external cost assessment of nuclear power plant accident considering risk aversion: The Korean case," Energy Policy, Elsevier, vol. 92(C), pages 111-123.

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