Managing Groundwater in a Mining Region: An Opportunity to Compare Best‐Worst and Referendum Data

25 Pages Posted: 28 Apr 2020

See all articles by Darla Hatton MacDonald

Darla Hatton MacDonald

University of Tasmania - Tasmanian School of Business & Economics

John M. Rose

The University of Sydney

Robert Johnston

Clark University - George Perkins Marsh Institute

Rosalind H. Bark

affiliation not provided to SSRN

Jodie Pritchard

affiliation not provided to SSRN

Date Written: October 2019

Abstract

In nonmarket valuation, practitioners must choose a format for the valuation questions. A common approach in discrete choice experiments is the ‘pick‐one’ format, often with two alternative policy proposals and a status quo from which the respondent selects. Other proposed formats, include best‐worst elicitation, where respondents are asked to indicate their most and least favoured alternative from a set. Although best‐worst formats can offer efficiency in data collection, they can also lead to responses that are difficult to reconcile with neoclassical welfare estimation. The current article explores methodological issues surrounding the use of pick‐one versus best‐worst data for nonmarket valuation, focusing on framing and status quo effects that may occur within three‐alternative discrete choice experiments. We illustrate these issues using a case study of surplus groundwater use from Western Australian mining. Results identify concerns that may render best‐worst data unsuitable for welfare estimation, including a prevalence of serial choices in which the status quo is universally chosen as the worst alternative, rendering part of the choice process deterministic. Asymmetry of preferences and serial choices can be obscured when models are estimated using ‘naively’ pooled best‐worst data. Results suggest that caution is warranted when using best‐worst data for valuation, even when pooled results appear satisfactory.

Keywords: Aboriginal cultural sites, best‐worst scaling, groundwater, habitat, mining, water resources, willingness to pay

Suggested Citation

Hatton MacDonald, Darla and Rose, John M. and Johnston, Robert and Bark, Rosalind H. and Pritchard, Jodie, Managing Groundwater in a Mining Region: An Opportunity to Compare Best‐Worst and Referendum Data (October 2019). Australian Journal of Agricultural and Resource Economics, Vol. 63, Issue 4, pp. 897-921, 2019, Available at SSRN: https://ssrn.com/abstract=3586835 or http://dx.doi.org/10.1111/1467-8489.12326

Darla Hatton MacDonald (Contact Author)

University of Tasmania - Tasmanian School of Business & Economics ( email )

Locked Bag 1317
Launceston, 7250
Australia

John M. Rose

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Robert Johnston

Clark University - George Perkins Marsh Institute

Rosalind H. Bark

affiliation not provided to SSRN

No Address Available

Jodie Pritchard

affiliation not provided to SSRN

No Address Available

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