Accounting for respondent uncertainty to improve willingness-to-pay estimates

Abstract

In this paper, we develop an econometric model of willingness to pay (WTP) that integrates data on respondent uncertainty regarding their own WTP. The integration is utility consistent, there is no recoding of variables, and no need to calibrate the contingent responses to actual payment data, so the approach can "stand alone." In an application to a valuation study related to whooping crane restoration, we find that this model generates a statistically lower expected WTP than the standard contingent valuation (CV) model. Moreover, the WTP function estimated with this model is not statistically different from that estimated using actual payment data suggesting that, when properly analyzed using data on respondent uncertainty, CV decisions can simulate actual payment decisions. This method allows for more reliable estimates of WTP that incorporate respondent uncertainty without the need for collecting comparable actual payment data.

Citation

Moore, Rebecca; Bishop, Richard C.; Provencher, Bill; Champ, Patricia A. 2010. Accounting for respondent uncertainty to improve willingness-to-pay estimates. Canadian Journal of Agricultural Economics. 58(3): 381-401.