Grantee Research Project Results

1997 Progress Report: Preference Formation and Elicitation in Valuing Non-Market Goods

EPA Grant Number: R824679
Title: Preference Formation and Elicitation in Valuing Non-Market Goods
Investigators: Brookshire, David S. , Kaplan, Hillard , McKee, Michael , Berrens, Robert , Jenkins, Hank , Ganderton, Philip
Institution: University of New Mexico
EPA Project Officer: Hahn, Intaek
Project Period: October 1, 1995 through September 30, 1997
Project Period Covered by this Report: October 1, 1996 through September 30, 1997
Project Amount: $184,998
RFA: Valuation and Environmental Policy (1995) RFA Text |  Recipients Lists
Research Category: Environmental Justice

Objective:

The objective of this research project is to investigate the interaction between value formation and value elicitation. The project is based on the premise that an understanding of how individuals form environmental values cannot be decoupled from value statement problems and the choice of elicitation mechanism. The methods we are employing include a combination of focus groups, laboratory experiments, and telephone surveys.

The focus of the survey effort is to measure the nonmarket benefits of protecting instream flows. In February 1995, we conducted a dichotomous choice contingent valuation (CV) telephone survey using a voluntary contribution trust fund format, and replicated it in February 1996. Our analysis of the data involved sensitivity tests to detect a change in the scope of the good, and corollary tests for sensitivity to information about the collective nature of providing the good and the temporal reliability of the results. Using the pooled data, we test sensitivity to scope and the group-size reminder under alternative modeling assumptions. We use four parametric models and evaluate the results of estimates of mean and median willingness to pay (WTP) and interquartile ranges.

Progress Summary:

The evidence compiled to date supports sensitivity to scope. One policy caveat that should be noted is that estimates of mean WTP are extremely sensitive to the distributional assumption, while estimates of median WTP are much more conservative and stable. The evidence also supports insensitivity to the group-size reminder.

Of significance is the absence of evidence supporting the "contribution model." Further, our results suggest that telephone surveys may be credible as an alternative to in-person interviews for investigating particular issues in contingent valuation studies.

Future Activities:

In the future, we will perform a side-by-side comparison of the group-size reminder for open-ended and dichotomous choice formats. We have collected all necessary data, including an additional split-sample cross treatment.

The behavioral laboratory effort for this project is focused on understanding the individual decision process in valuation. Our first investigation found that the disparity between willingness to accept (WTA) and WTP is due to uncertainty concerning the payoff from the good. This uncertainty can arise from a variety of sources. Value uncertainty is when the good is unfamiliar to the respondent. Outcome uncertainty concerns whether the agency in question will be able to provide the good with the funds generated. We found that the disparity is a function of the level of uncertainty and can be mitigated when the purchase is reversible.

A second issue that we are investigating is the role of provision mechanisms on stated WTP values. Our laboratory work will investigate WTP under different public good provision mechanisms that can be implemented in surveys. Although data collection is not yet complete, the evidence suggests that individuals give different responses for the same good depending on the mechanism. Future laboratory work will investigate the role of uncertainty concerning payoffs on public good provision and stated WTP.

Supplemental Keywords:

RFA, Scientific Discipline, Economic, Social, & Behavioral Science Research Program, Economics & Decision Making, decision-making, Social Science, Ecology and Ecosystems, compensation, public values, economic benefits, multi-objective decision making, public resources, ecosystem valuation, policy analysis, social impact analysis, standards of value, community involvement, cost effectiveness, environmental values, public policy, value elicitation, decision analysis, economic incentives, information dissemination, psychological attitudes, social psychology, valuation, social resistance, stated preference, empirical validation, environmental assets, environmental policy

Progress and Final Reports:

Original Abstract

1996

Final