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Handbook on Contingent Valuation

Edited by Anna Alberini and James R. Kahn

The Handbook on Contingent Valuation is unique in that it focuses on contingent valuation as a method for evaluating environmental change. It examines econometric issues, conceptual underpinnings, implementation issues as well as alternatives to contingent valuation. Anna Alberini and James Kahn have compiled a comprehensive and original reference volume containing invaluable case studies that demonstrate the implementation of contingent valuation in a wide variety of applications. Chapters include those on the history of contingent valuation, a practical guide to its implementation, the use of experimental approaches, an ecological economics perspective on contingent valuation and approaches for developing nations.
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Chapter 6: Protest Bids, Commensurability, and Substitution: Contingent Valuation and Ecological Economics

Brent Haddad and Richard Howarth


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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