The Contingent Valuation Method: Retrospect and Prospect

Spash, Clive L. (2008): The Contingent Valuation Method: Retrospect and Prospect. Published in: Environment and Planning C: Government & Policy , Vol. 26, No. 1 (2008): pp. 34-53.

Abstract

This paper explores the contingent valuation method for environmental valuation. Issues are raised over the validity of the approach as a method of assessing the underlying preferences of individuals. An alternative interpretation is given to the method as a means of exploring underlying motivation in a rich vein of social psychological research.

• Item Type: MPRA Paper
• Language: English
• Keywords: Contingent valuation; cost-benefit analysis; valuation of Nature; economic valuation; psychology; behaviour; ethics; lexicographic preferences; incommensurability; refusals to trade; public policy; survey design; sociology of science
• Subjects: A - General Economics and Teaching > A1 - General Economics > A11 - Role of Economics ; Role of Economists ; Market for Economists; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D46 - Value Theory; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q57 - Ecological Economics: Ecosystem Services ; Biodiversity Conservation ; Bioeconomics ; Industrial Ecology; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

References

Aadland, D. and Caplan, A.J. (2003) Cheap talk reconsidered: New evidence from CVM. Department of Economics. Utah State University: 24pp.

Ajzen, I. (1991) The theory of planned behaviour. Organisational Behaviour and Human Decision Processes 50: 179-211.

Ajzen, I., Brown, T.C. and Carvajal, F. (2004) Explaining the discrepancy between intentions and actions: The case of hypothetical bias in contingent valuation. Personality and Social Psychology Bulletin 30(9): 1108-1121.

Ajzen, I., Brown, T.C. and Rosenthal, L.H. (1996) Information bias in contingent valuation: Effects of personal relevance, quality of information and motivational orientation. Journal of Environmental Economics and Management 30(1): 43-57.

Amigues, J.P., Boulatoff, C., Desaigues, B., Gauthier, C. and Keith, J.E. (2002) The benefits and costs of riparian analysis habitat preservation: A willingness to accept/willingness to pay contingent valuation approach. Ecological Economics 43(1): 17-31.

Arrow, K., Solow, R., Portney, P.R., Leamer, E., Radner, R. and Schuman, H (1993) Natural Resource Damage Assessment Under the Oil Pollution Act of 1990. Federal Register 58(10): 4601-4614.

Bandara, R. and Tisdell, C. (2004) The net benefit of saving the Asian elephant: A policy and contingent valuation study. Ecological Economics 48(1): 93-107.

Bateman, I.J., Carson, R.T., Day, B. Hanemann, M. Hanley, N., Hett, T., Jones-Lee, M., Loomes, G., Mourato, S., Ozdemioglu, E., Pearce, D.W., Sugden, R. and Swanson, J. (eds.). (2002) Economic Valuation with Stated Preference Techniques: A Manual. Cheltenham: Edward Elgar.

Bateman, I.J., Diamand, E., Langford, I.H. and Jones, A. (1996) Household willingness to pay and farmers' willingness to accept compensation for establishing a recreational woodland. Journal of Environmental Planning and Management 39(1): 21-44.

Bhatia, M.R. and Fox-Rushby, J.A. (2003) Validity of willingness to pay: hypothetical versus actual payment. Applied Economics Letters 10(12): 737-740.

Bishop, R.C. and Heberlein, T.A. (1986) Does contingent valuation work? In Valuing Environmental Goods: An Assessment of the Contingent Valuation Method. R.G. Cummings, D.S. Brookshire and W.D. Schulze (eds.). Totowa, New Jersey: Rowman and Allanheld: 123-147.

Boyle, K. (1989) Commodity specification and the framing of contingent valuation questions. Land Economics 65: 57-63.

Brown, T.C., Ajzen, I. and Hrubes, D. (2003) Further tests of entreaties to avoid hypothetical bias in referendum contingent valuation. Journal of Environmental Economics and Management 46(2): 353-361.

Brown, T.C. and Gregory, R. (1999) Why the WTA-WTP disparity matters. Ecological Economics 28(3): 323-335.

Burgess, J., Clark, J. and Harrison, C.M. (1998) Respondents' evaluations of a CV survey: A case study based on an economic valuation of the wildlife enhancement scheme, Pevensey levels in East Sussex. Area 30(1): 19-27.

Burgess, J., Clark, J. and Harrison, C.M. (2000) Culture, communication, and the information problem in contingent valuation surveys: A case study of a Wildlife Enhancement Scheme. Environment and Planning C: Government and Policy 18(5): 505-524.

Camacho-Cuena, E., Garcia-Gallego, A., Georgantzis, N. and Sabater-Grande, G. (2004) An experimental validation of hypothetical WTP for a recyclable product. Environmental and Resource Economics 27(3): 313-335.

Carson, R.T., Flores, N.E., Martin, K.M. and Wright, J.L. (1996) Contingent valuation and revealed preference methodologies: Comparing the estimates for quasi-public goods. Land Economics 72(1): 80-99.

Carson, R.T., Flores, N.E. and Meade, N.F. (2001) Contingent valuation: Controversies and evidence. Environmental and Resource Economics 19(2): 173-210.

Carson, R.T., Wright, J., Alberini, A., Carson, N. and Flores, N. (1994) A Bibliography of Contingent Valuation Studies and Papers. La Jolla, California, Natural Resource Damage Assessment, Inc.

Ciriacy-Wantrup, S. (1947) Capital returns from soil conservation practices. Journal of Farm Economics 29: 1188-1190.

Clark, J., Burgess, J. and Harrison, C.M. (2000) "I struggled with this money business": Respondents' perspectives on contingent valuation. Ecological Economics 33(1): 45-62.

Cummings, R.G., Brookshire, D.S. and Schulze, W.D. (eds.). (1986) Valuing Environmental Goods: An Assessment of the Contingent Valuation Method. Totowa, New Jersey: Rowman and Allanheld.

Cummings, R.G. and. Taylor, L.O. (1999) Unbiased value estimates for environmental goods: A cheap talk design for the contingent valuation method. American Economic Review 89(3): 649-665.

Department of the Environment Transport and the Regions (1999) The Environmental Costs and Benefits of the Supply of Aggregates: Phase 2. London, Department of the Environment Transport and the Regions. 208.

Department of the Environment, UK. (1991) Policy Appraisal and the Environment: A Guide for Government Departments. London: Her Majesty's Stationary Office.

Department of the Interior (1986) Final rule for natural resource damage assessments under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). Federal Register 51(148): 27674-27753.

Fischhoff, B. (1991) Value elicitation: Is there anything in there? American Psychologist 46: 835-847.

Fishbein, M. and Ajzen, I. (1975) Belief, Attitude, Intention and Behavior: An Introduction to Theory and Research. Reading, Massachusetts: Addison-Wesley.

Hanemann, W.M. (1991) Willingness to pay and willingness to accept: How much can they differ? American Economic Review 81(3): 635-647.

Hanemann, W.M. (1994) Valuing the environment through contingent valuation. Journal of Economic Perspectives 8(4): 19-43.

Hanley, N. and Shogren, J.F. (2005) Is cost-benefit analysis anomaly-proof? Environmental and Resource Economics 32(1): 13-34.

Hanley, N. and Spash, C.L. (1993) Cost-Benefit Analysis and the Environment. Aldershot, England: Edward Elgar.

Harrison, G.W. and Lesley, J.C. (1996) Must contingent valuation surveys cost so much? Journal of Environmental Economics and Management 31(1): 79-95.

Hausman, J.A., (ed.). (1993) Contingent Valuation: A Critical Assessment. Amsterdam: North-Holland.

Kahneman, D. and Knetsch, J.L. (1992) Valuing public goods: The purchase of moral satisfaction. Journal of Environmental Economics and Management 22(1): 57-70.

Kahneman, D., Knetsch, J.L. and Thaler, R.H. (1991) Anomalies: The endowment effect, loss aversion, and status-quo bias. Journal of Economic Perspectives 5(1): 193-206.

Kahneman, D., Ritov, I., Jacowitz, K.E. and Grant, P. (1993) Stated willingness to pay for public goods: A psychological perspective. Psychological Science 4(5): 310-315.

Kahneman, D. and Tversky, A. (1979) Prospect theory: An analysis of decision under risk. Econometrica 47(2): 263-291.

Klose, T. (1999) The contingent valuation method in health care. Health Policy 47(2): 97-123.

Knetsch, J.L. (1994) Environmental valuation: Some problems of wrong questions and misleading answers. Environmental Values 3(4): 351-368.

Knetsch, J.L. (1995) Asymmetric valuation of gains and losses and preference order assumptions. Economic Inquiry 33(1): 134-141.

Knetsch, J.L. (2005) Gains, losses, and the US EPA economic analyses guidelines: A hazardous product? Environmental and Resource Economics 32(1): 91-112.

Knetsch, J.L. and Sinden, J.A. (1984) Willingness to pay and compensation demanded: Experimental evidence of an unexpected disparity in measures of value. Quarterly Journal of Economics 99(3): 507-521.

List, J.A. (2003) Does market experience eliminate market anomalies? Quarterly Journal of Economics 118(1): 41-71.

Lowenstein, G. (1987) Anticipation and the valuation of delayed consumption. Economic Journal 97: 666-684.

Lowenstein, G. and Prelec, D. (1991) Negative time preference. American Economic Review 81: 347-352.

Lowenstein, G. and Prelec, D. (1992) Anomalies in intertemporal choice: Evidence and an interpretation. Quarterly Journal of Economics 107: 573-597.

MacMillan, D.C., Duff, E.I. and Elston, D.A. (2001) Modelling the non-market environmental costs and benefits of biodiversity projects using contingent valuation data. Environmental and Resource Economics 18(4): 391-410.

Mitchell, R.C. and R.T. Carson (1989) Using Surveys to Value Public Goods: The Contingent Valuation Method. Washington DC: Resources for the Future.

Murphy, J.J., Stevens, T.H. and Weatherhead, D. (2005) Is cheap talk effective at eliminating hypothetical bias in a provision point mechanism? Environmental and Resource Economics 30(3): 327-343.

Schkade, D.A. and Payne, J.W. (1993) Where do the numbers come from?: How people respond to contingent valuation questions. In Contingent Valuation: A Critical Assessment. J. A. Hausman (ed.). Amsterdam: Elsevier Science Publisher: 271-293.

Schkade, D.A. and Payne, J.W. (1994) How people respond to contingent valuation questions: A verbal protocol analysis of willingness to pay for an environmental regulation. Journal of Environmental Economics and Management 26(1): 88-109.

Sen, A. (1977) Rational fools: A critique of the behavioral foundations of economic theory. Philosophy and Public Affairs 6: 317-344.

Shogren, J.F. and Hayes, D.J. (1997) Resolving differences in willingness to pay and willingness to accept: Reply. American Economic Review 87(1): 241-244.

Shogren, J.F., Shin, S.Y., Hayes, D.J. and Kliebenstein, J.B. (1994) Resolving differences in willingness to pay and willingness to accept. American Economic Review 84(1): 255-270.

Spash, C.L. (1998) Environmental Values and Wetland Ecosystems: CVM, Ethics and Attitudes. Cambridge, Cambridge Research for the Environment, Department of Land Economy, University of Cambridge.

Spash, C.L. (2002a) Informing and forming preferences in environmental valuation: Coral reef biodiversity. Journal of Economic Psychology 23(5): 665-687.

Spash, C.L. (2002b) Dividing time and discounting the future. In Greenhouse Economics: Value and Ethics. C.L. Spash (ed.). London: Routledge: 201-220.

Spash, C.L. (2006) Non-economic motivation for contingent values: Rights and attitudinal beliefs in the willingness to pay for environmental improvements. Land Economics 82(4): 602-622.

Thaler, R. (1980) Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization 1(1): 39-60.

Thayer, M.A. (1981) Contingent valuation techniques for assessing environmental impacts: Further evidence. Journal of Environmental Economics and Management 8: 27-44.

US Environmental Protection Agency (2000) Guidelines for Preparing Economic Analyses. Washington DC, United States Environmental Protection Agency.

Vatn, A. (2004) Environmental valuation and rationality. Land Economics 80(1): 1-18.

Willis, K. (1995) Contingent valuation in a policy context: The National Oceanic and Atmospheric Administration Report and its implications for the use of contingent valuation methods in policy analysis in Britain. In Environmental Valuation: New Perspectives. K. G. Willis and J. T. Corkindale (eds.). Wallingford: CAB International: 118-143.