How Should Consumers’ Willingness to Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches

This study compares the performance of four commonly used approaches to measure consumers’ willingness to pay with real purchase data (REAL): the open-ended (OE) question format; choicebased conjoint (CBC) analysis; Becker, DeGroot, and Marschak’s (BDM) incentive-compatible mechanism; and incentive-aligned choice-based conjoint (ICBC) analysis. With this five-in-one approach, the authors test the relative strengths of the four measurement methods, using REAL as the benchmark, on the basis of statistical criteria and decision-relevant metrics. The results indicate that the BDM and ICBC approaches can pass statistical and decision-oriented tests. The authors find that respondents are more price sensitive in incentive-aligned settings than in non-incentive-aligned settings and the REAL setting. Furthermore, they find a large number of “none” choices under ICBC than under hypothetical conjoint analysis. This study uncovers an intriguing possibility: Even when the OE format and CBC analysis generate hypothetical bias, they may still lead to the right demand curves and right pricing decisions.

Random error in willingness to pay measurement: A multiple indicators, latent variable approach to the reliability of contingent values

The reliability of measurement refers to unsystematic error in observed responses. Investigations of the prevalence of random error in stated estimates of willingness to pay (WTP) are important to an understanding of why tests of validity in CV can fail. However, published reliability studies have tended to adopt empirical methods that have practical and conceptual limitations when applied to WTP responses. This contention is supported in a review of contingent valuation reliability studies that demonstrate important limitations of existing approaches to WTP reliability. It is argued that empirical assessments of the reliability of contingent values may be better dealt with by using multiple indicators to measure the latent WTP distribution. This latent variable approach is demonstrated with data obtained from a WTP study for stormwater pollution abatement. Attitude variables were employed as a way of assessing the reliability of open-ended WTP (with benchmarked payment cards) for stormwater pollution abatement. The results indicated that participants' decisions to pay were reliably measured, but not the magnitude of the WTP bids. This finding highlights the need to better discern what is actually being measured in VVTP studies, (C) 2003 Elsevier B.V. All rights reserved.

Changing abundance of elephants and willingness to pay for their conservation

This paper explores the way in which the stated willingness to pay for the conservation of Asian elephants in Sri Lanka varies with hypothetical variations in their abundance. To do that, it relies on results from a sample of residents of Colombo. The willingness to pay function is found to be unusual. It increases at an increasing rate for hypothetical reductions in the elephant population compared to its current level (a level that makes the Asian elephant endangered) and also increases at a decreasing rate for increases in this population from its current level. Rational explanations are Oven for this relationship. The relationship is, however, at odds with relationships suggested in some of the literature for total economic value as a function of the abundance of a wildlife species. It is suggested that willingness to pay for conservation of a species rationally includes a strategic element and may not always measure the total economic value of it species. Nevertheless. willingness to pay is still policy relevant in such cases. (c) 2005 Elsevier Ltd. All rights reserved.

The role of uncertainty in the relationship between fairness evaluations and willingness to pay

Participants in contingent valuation studies may be uncertain about a number of aspects of the policy and survey context. The uncertainty management model of fairness judgments states that individuals will evaluate a policy in terms of its fairness when they do not know whether they can trust the relevant managing authority or experience uncertainty due to insufficient knowledge of the general issues surrounding the environmental policy. Similarly, some researchers have suggested that, not knowing how to answer WTP questions, participants convey their general attitudes toward the public good rather than report well-defined economic preferences. These contentions were investigated in a sample of 840 residents in four urban catchments across Australia who were interviewed about their WTP for stormwater pollution abatement. Four sources of uncertainty were measured: amount of prior issue-related thought, trustworthiness of the water authority, insufficient scenario information, and WTP response uncertainty. A logistic regression model was estimated in each subsample to test the main effects of the uncertainty sources on WTP as well as their interaction with fairness and proenvironmental attitudes. Results indicated support for the uncertainty management model in only one of the four samples. Similarly, proenvironmental attitudes interacted rarely with uncertainty to a significant level, and in ways that were more complex than hypothesised. It was concluded that uncertain individuals were generally not more likely than other participants to draw on either fairness evaluations or proenvironmental attitudes when making decisions about paying for stormwater pollution abatement.

Tooth replacement for partially dentate elders: a willingness-to-pay analysis

Objectives: The primary aim of this study was to investigate partially dentate elders' willingness-to-pay (WTP) for two different tooth replacement strategies: Removable Partial Dentures (RPDs) and, functionally orientated treatment according to the principles of the Shortened Dental Arch (SDA). The secondary aim was to measure the same patient groups' WTP for dental implant treatment.Methods: 55 patients who had completed a previous RCT comparing two tooth replacement strategies (RPDs (n=27) and SDA (n=28)) were recruited (Trial Registration no. ISRCTN26302774). Patients were asked to indicate their WTP for treatment to replace missing teeth in a number of hypothetical scenarios using the payment card method of contingency evaluation coupled to different costs. Data were collected on patients' social class, income levels and other social circumstances. A Mann-Whitney U Test was used to compare differences in WTP between the two treatment groups. To investigate predictive factors for WTP, multiple linear regression analyses were conducted.Results: The median age for the patient sample was 72.0 years (IQR: 71-75 years). Patients who had been provided with RPDs indicated that their WTP for this treatment strategy was significantly higher (€550; IQR: 500-650) than those patients who had received SDA treatment (€500; IQR: 450-550) (p=0.003). However patients provided with RPDs indicated that their WTP for SDA treatment (€650; IQR: 600-650) was also significantly higher than those patients who had actually received functionally orientated treatment (€550; IQR: 500-600) (p<0.001). The results indicated that both current income levels and previous treatment allocation were significantly correlated to WTP for both the RPD and the SDA groups. Patients in both treatment groups exhibited little WTP for dental implant treatment with a median value recorded which was half the market value for this treatment (€1000; IQR: 500-1000).Conclusions: Amongst this patient cohort previous treatment experience had a strong influence on WTP as did current income levels. Both treatment groups indicated a very strong WTP for simpler, functionally orientated care using adhesive fixed prostheses (SDA) over conventional RPDs. Clinical significance: Partially dentate older patients expressed a strong preference for functionally orientated tooth replacement as an alternative to conventional RPDs.

Willingness of Sri Lankan farmers to pay for a scheme to conserve elephants: An empirical analysis

This paper explores the feasibility of adopting an integrated economic approach to raise farmers’ tolerance of the presence of elephants on their farming lands. Responses to this approach were sought from a sample of farmers in the areas affected by human elephant conflict in the northwestern province of Sri Lanka. Results from a contingent valuation survey of their willingness to pay for a scheme to conserve elephants are also reported. Two separate logit regression analyses were undertaken to examine the factors that influence the farmers’ responses for the payment principle question and their opinions on the integrated economic approach. Although found that the majority of the respondents expressed their willingness to pay for the proposed scheme and supported for the implementation of the integrated approach, we have insufficient data yet to determine if their support and financial contribution would be sufficient to set up this programme and also to predict its economic viability. Nevertheless, the overall finding of this study provides an improved economic assessment of the farmers’ attitudes towards the wild elephant in Sri Lanka. At the same time the study shows that, contrary to commonly held assumptions, farmers in this developing country, do support wildlife conservation.

Discounting Spotted Apples: Investigating Consumers’ Willingness to Accept Cosmetic Damage in an Organic Product, November 2006

Organic producers have limited methods of avoiding plant diseases that result in cosmetic damage to produce. Therefore, the appearance of organic produce is often less than perfect. We use an experimental auction to investigate how cosmetic damage affects consumers’ willingness to pay for organic apples. We find that 75% of the participants are willing to pay more for organic than for conventional apples given identical appearance. However, at the first sight of any imperfection in the appearance of the organic apples, this segment is significantly reduced. Furthermore, we find that there is a significant effect of interaction between cosmetic damage and product methods. Even though most consumers say they buy organic products to avoid pesticides, we find that cosmetic damage has a larger impact on the willingness to pay for organic apples than for conventional apples.

Eliciting preferences for collectively financed health programmes : the "willingness to assign" approach

Improving public involvement in health system decision making stands as a primary goal in health systems reform. However, still limited evidence is found on how best to elicit preferences for health care programs. This paper examines a contingent choice technique to elicit preferences among health programs so called, willingness to assign (WTAS): Moreover, we elicited contingents rankings as well as the willingness to pay extra taxes for comparative purposes. We argue that WTAS reveals relative ( monetary-based) values of a set of competing public programmes under a hypothetical healthcare budget assessment. Experimental evidence is reported from a delibertive empirical study valuing ten health programmes in the context of the Catalan Health Services. Evidence from a our experimental study reveals that perferences are internally more consistent and slightly less affected by "preference reversals" as compared to values revealed from the willingness to pay (WTP) extra taxes approach. Consistent with prior studies, we find that the deliberative approach helped to avoid possible misunderstandings. Interestingly, although programmes promoting health received the higher relative valuation, those promoting other health benefits also ranked highly

Eliciting preferences for collectively financed health programmes : the "willingness to assign" approach

Improving public involvement in health system decision making stands as a primary goal in health systems reform. However, still limited evidence is found on how best to elicit preferences for health care programs. This paper examines a contingent choice technique to elicit preferences among health programs so called, willingness to assign (WTAS): Moreover, we elicited contingents rankings as well as the willingness to pay extra taxes for comparative purposes. We argue that WTAS reveals relative ( monetary-based) values of a set of competing public programmes under a hypothetical healthcare budget assessment. Experimental evidence is reported from a delibertive empirical study valuing ten health programmes in the context of the Catalan Health Services. Evidence from a our experimental study reveals that perferences are internally more consistent and slightly less affected by "preference reversals" as compared to values revealed from the willingness to pay (WTP) extra taxes approach. Consistent with prior studies, we find that the deliberative approach helped to avoid possible misunderstandings. Interestingly, although programmes promoting health received the higher relative valuation, those promoting other health benefits also ranked highly