Chapter 6: Protest Bids, Commensurability, and Substitution: Contingent Valuation and Ecological Economics
Brent Haddad and Richard Howarth It is fair to say that the worth of the things we love is better measured by our unwillingness to pay for them. Mark Sagoﬀ, 1988: 68 6.1 Introduction Contingent valuation (CV) surveys regularly encounter responses that are diﬃcult to reconcile with the standard assumptions of applied welfare economics. There are many well-known explanations for such behavior. Consistent with the theory of public goods, respondents may strategically bid below their true willingness to pay (WTP) to secure a public good, if they believe that others will carry the cost of providing that good. Eﬀorts are regularly made in survey design to enhance ‘incentive compatibility’ and thereby minimize strategic behavior. Mitchell and Carson (1989) express puzzlement over strategic behavior. Noting that response outliers seem to be concentrated among respondents with lower incomes and education levels, and among older and female respondents, they comment: ‘Such characteristics hardly describe those of whom strategic behavior is expected’ (1989: 167).1 Of course, the theory behind CV assumes that all individuals are equally strategic in their behavior. Another category of anomalous behavior is the embedding eﬀect, the bête noir of CV in the eyes of the expert National Oceanic and Atmospheric Administration (NOAA) Contingent Valuation Panel (NOAA, 1993). Embedding describes a behavior in which respondents’ WTP diﬀers based on whether the object of valuation is part of a program or set of similar objects, or stands alone. If it is part of a program or...
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