CLASS EXAMPLE #1 (Non-parametric approach)
Exercise. Using a non-parametric approach, estimate the mean of the maximum willingness to pay for a reduction of 2% in a given disease, according to the following data obtained from a contingent valuation survey with a single-bounded dichotomous choice elicitation format question
Data. When asked for a 100 euro payment, nobody accepted to pay. 10% said yes to 50 euro. Those asked for 30, 20 and 5 euro payment, answered yes 40%, 60% and 80% of those questioned, respectively. And nobody would object to the 2% reduction in the disease if they would not have to pay
Solution. A mean maximum willingness to pay of 27.5 euros per person for a 2% reduction in the number of occurrences from the specified disease
Additional problem. Estimate the median of the maximum willingness to pay, from the same data
CLASS EXAMPLE #2 (Parametric approach)
Exercise. A single-bounded dichotomous choice contingent valuation survey was applied in the metropolitan region of Barcelona, to find the mean of the maximum Barceloneans would be willingness to pay to place underground the various high voltage power lines crossing the region, in order to improve the landscape
Solution. A mean maximum willingness to pay of 7.99 euros per person for the removal of the high voltage power lines of the region. [limdep instructions] -opens as text file
Additional problem. If the adult population of the region were 3 million people, how can it be used in a cost-benefit analysis of a project to remove such power lines? According to the limited information provided, what costs and benefits would you consider?
CLASS EXAMPLE #3.a (Equivalency Analysis - Debits)
Exercise. With enough investment, a program can be implemented to avoid some types of large forest fires. A single bounded dichotomous choice collected the following data to value a program of this type that would prevent such fire on a given area and type of forest. [Spanish version of the questionnaire]
Data. In [limdep] [excel] [csv] format. Variable BID corresponds to the payment bid, and YESNO to the answer (yes=1, and no=0)
Solution. A mean maximum willingness to pay of 62.26 euros per person for the prevention of the given amount, type, and location of forest from being burned
Additional problem.
CLASS EXAMPLE #3.b (Equivalency Analysis - Credits)
Exercise. A contingent valuation exercise is conducted to value an afforestation program of a given type and amount of forest, in a given location. A single-bounded dichotomous choice format is used, where the bid amount is set fixed to 60 euros (i.e., the rounded figure from exercise example 3.a) and the amount of afforestation surface varies across the survey. [Spanish version of the questionnaire]
Data. In [limdep] [excel] [csv] format. Variable PERCENT corresponds to the amount of forest (expressed as a percentage of the area of reference in exercise example 3.a), and YESNO to the answer (yes=1, and no=0)
Solution. A mean minimum afforestation amount of 29.30% of the originally burned area for a payment of 60 euros per person, for that particular type, and location of forest. Therefore, the burned surface has to be compensated by afforesting this area and near one third additional surface, according to the value-to-value equivalency analysis
Additional problem.
CLASS EXAMPLE #4.a (Single-bounded dichotomous choice - Artificial agents)
CLASS EXAMPLE #4.b (Double-bounded dichotomous choice - Artificial agents)
SOFTWARE
- NLogit-Limdep (free student version and manuals [broken link])
READINGS
- Carson, Richard T., Robert C. Mitchell, Michael Hanemann, Raymond J. Kopp, Stanley Presser, and Paul A. Rood (2003) Contingent Valuation and Lost Passive Use: Damages from the Exxon Valdez Oil Spill. Environmental and Resource Economics. 25, 257-286.
- Carson, Richard (2011) Contingentvaluation: a comprehensive bibliography and history. Cheltenham: Edward Elgar.
- Hanemann, W. Michael, and Barbara Kanninen (1999) “The Statistical Analysis of Discrete-Response CV Data.” In Ian J. Bateman and Kenneth G. Willis (eds.) Valuing Environmental Preferences: Theory and Practice of the Contingent Valuation Method in the US, EU, and developing Countries. Oxford: Oxford University Press.
- Whitehead, John C. (2006) “A Practitioner's Primer on Contingent Valuation” in Anna Alberini , James R. Kahn (eds.) Handbook On Contingent Valuation. Cheltenham: Edward Elgar, chapter 3, pp. 66-90.