On the Inference About Willingness to Pay Distribution Using Contingent Valuation Data

45 Pages Posted: 2 Apr 2022

See all articles by Mikolaj Czajkowski

Mikolaj Czajkowski

University of Warsaw

Ewa Zawojska

University of Warsaw - Faculty of Economic Sciences

Norman Meade

affiliation not provided to SSRN

Ronaldo Seroa da Motta

Universidade do Estado do Rio de Janeiro (UERJ)

Mike Welsh

affiliation not provided to SSRN

Ramon Arigoni Ortiz

affiliation not provided to SSRN

Abstract

Although contingent valuation (CV) is one of the main sources of estimates of non-market values of environmental goods, little guidance exists regarding parametric approaches for modelling CV data, which would reliably estimate willingness-to-pay (WTP) values based on binary choice, payment card or open-ended preference elicitation data, among others. CV studies often rely on relatively simple approaches to modeling stated preference responses. Lower-bound, non-parametric estimates seem to be preferred in legal cases, while studies that apply parametric approaches often select a specification among a limited set of commonly used distributions. To enhance the reliability of CV-based WTP estimates, we propose to adopt a more flexible approach to parametric modelling of a WTP distribution, by considering a wide range of parametric model specifications. We demonstrate the advantages of the proposed approach using databases from two large CV studies: the eutrophication reduction valuation for the Baltic Sea Action Plan and the Deepwater Horizon natural resource damage assessment. We find non-negligible differences in WTP value estimates across models with different assumed parametric distributions, and we observe the variation in the values to decrease when only better-fitting models are considered. This emphasizes the need for cautiously identifying the model best fitting to the data.

Keywords: contingent valuation, parametric modelling, stated preferences, willingness to pay, welfare estimates

Suggested Citation

Czajkowski, Mikolaj and Zawojska, Ewa and Meade, Norman and Seroa da Motta, Ronaldo and Welsh, Mike and Ortiz, Ramon Arigoni, On the Inference About Willingness to Pay Distribution Using Contingent Valuation Data. Available at SSRN: https://ssrn.com/abstract=4073496 or http://dx.doi.org/10.2139/ssrn.4073496

Mikolaj Czajkowski (Contact Author)

University of Warsaw ( email )

Ewa Zawojska

University of Warsaw - Faculty of Economic Sciences ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland

Norman Meade

affiliation not provided to SSRN ( email )

No Address Available

Ronaldo Seroa da Motta

Universidade do Estado do Rio de Janeiro (UERJ) ( email )

Av Borges de Medeiros 3709 ap 401
ap 401
Lagoa, 22470-001
Brazil
21997775494 (Phone)

Mike Welsh

affiliation not provided to SSRN ( email )

No Address Available

Ramon Arigoni Ortiz

affiliation not provided to SSRN ( email )

No Address Available

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