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Monte Carlo Benchmarks for Discrete Response Valuation Methods

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  • Ju-Chin Huang
  • V. Kerry Smith

Abstract

This paper argues that the belief that discrete contingent valuation (CV) questions yield substantially larger estimates of the mean (and the median) willingness to pay (WTP) for nonmarket resources in comparison to open-ended CV questions is unfounded. Monte Carlo experiments estimate the factors influencing the performance of WTP estimates based on discrete response models. Most of the error arises from the specification errors common to the empirical models in the literature. These experiments suggest models where WTP is dominated by nonuse (or passive use) values are likely to have smaller errors than where large use values influence these decisions.

Suggested Citation

  • Ju-Chin Huang & V. Kerry Smith, 1998. "Monte Carlo Benchmarks for Discrete Response Valuation Methods," Land Economics, University of Wisconsin Press, vol. 74(2), pages 186-202.
  • Handle: RePEc:uwp:landec:v:74:y:1998:i:2:p:186-202
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    References listed on IDEAS

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    Cited by:

    1. Daniel Mccollum & Kevin Boyle, 2005. "The Effect of Respondent Experience/Knowledge in the Elicitation of Contingent Values: An Investigation of Convergent Validity, Procedural Invariance and Reliability," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 23-33.
    2. Dominika Dziegielewska & Robert Mendelsohn, 2007. "Does “No” mean “No”? A protest methodology," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 71-87.
    3. Richard C. Ready & Ståle Navrud & RW. Richard Dubourg, 2001. "How Do Respondents with Uncertain Willingness to Pay Answer Contingent Valuation Questions?," Land Economics, University of Wisconsin Press, vol. 77(3), pages 315-326.
    4. Soliño, Mario & Prada, Albino & Vázquez, María X., 2010. "Designing a forest-energy policy to reduce forest fires in Galicia (Spain): A contingent valuation application," Journal of Forest Economics, Elsevier, pages 217-233.
    5. Poe, Gregory L. & Vossler, Christian A., 2001. "Does Specification Error Explain the Discrepancy Between Open-Ended and Dichotomous Choice Contigent Valuation Responses? A Comment on "Monte Carlo Benchmarks for Discrete Valuation Methods"," Working Papers 127665, Cornell University, Department of Applied Economics and Management.
    6. Cameron, Trudy Ann & Poe, Gregory L. & Ethier, Robert G. & Schulze, William D., 2002. "Alternative Non-market Value-Elicitation Methods: Are the Underlying Preferences the Same?," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 391-425, November.
    7. Raymond Y. T. Yeung & Richard D. Smith & Lai-Ming Ho & Janice M. Johnston & Gabriel M. Leung, 2006. "Empirical implications of response acquiescence in discrete-choice contingent valuation," Health Economics, John Wiley & Sons, Ltd., vol. 15(10), pages 1077-1089.

    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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