Sensitivity of WTP Estimates to Definition of ‘Yes’: Reinterpreting Expressed Response Intensity

Author:

Kobayashi Mimako,Rollins Kimberly,Evans M. D. R.

Abstract

Willingness to pay (WTP) estimation typically involves some strategy for mapping nondichotomous contingent valuation (CV) responses onto a dichotomous yes/no dependent variable. We propose a new approach to selecting which responses qualify as ‘yes.’ We apply the proposed method to polychotomous CV data for preventative land management programs in the Great Basin. We also estimate WTP using other methods of response recoding found in the literature. By contrasting the results under different approaches, we demonstrate how and why WTP point estimates vary across recoding methods and discuss the comparative advantages of our more generalized recoding approach that is based on predicted probabilities of ‘yes’ responses.

Publisher

Cambridge University Press (CUP)

Subject

Economics and Econometrics,Agronomy and Crop Science

Reference74 articles.

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5. An ordered logit might appear to be a logical specification in estimating response probabilities, since distributions for WTP and bid amount could be expected to move in one direction only. We explored this possibility and found that estimation results do not seem to be ordered purely by “Bid,” but instead it appears that NS may not fall between PY and PN. We estimated model (1) using an ordered logit with the ordering moving along the continuum from DN through DY with NS in the middle and with the order of NS and PN switched. There was almost no difference in goodness of fit between the two models, so we cannot rule out that the NS and PN categories are not different. However, compared with the multinomial logit results, the covariates influence these two categories quite differently. While the ordering appears to work well for the other categories, the results on the NS category are not consistent with a simple ordering. Moreover, exploratory research suggests that the connection of this category to the covariates is not what one would expect from a simple ordering. It is likely that this is a mixed category that needs more detailed exploration in future research. For these reasons, we proceed with the multinomial logit specification, where the structural restrictions on the data are minimal.

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