Munich Personal RePEc Archive

Detecting social network effects on willingness to pay for environmental improvements using egocentric network measures

Janmaat, Johannus and Geleta, Solomon and Loomis, John (2019): Detecting social network effects on willingness to pay for environmental improvements using egocentric network measures.

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Abstract

Since people care about each other, an individual's willingness to pay to protect an environmental good or service will reflect their concern for others who would also be impacted by a change in the good or service. Through the extended social network, an individual's willingness to pay will reflect the impacts on people who they do not immediately know. If this effect is not considered, willingness to pay estimates can be biased. However, extended social networks are difficult to measure. We therefore explored the potential for egocentric social networks to help explain variations in willingness to pay. Given the conventional way of describing social networks, we demonstrate that egocentric social network measures should not be related to willingness to pay if there is no relationship between the social network measure and the willingness to pay for a change in the environmental good or service. When the social network measures are increasing in the willingness to pay for an environmental improvement, then a regression of willingness to pay on these social network measures will show a positive relationship. Empirically, we find such a relationship in the results of a choice experiment conducted in the central Okanagan of British Columbia. However, we also find that a measure of peoples assessment of the benefits of development relative to the environmental impacts was a more effective predictor. This may be a consequence of how the respondent's egocentric networks were measured. Alternative approaches to measuring the egocentric social network may be necessary.

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