To Pay or Not to Pay: Competing Theories to Explain Individuals’ Willingness to Pay for Public Environmental Goods

Abstract

Several theories have been proposed in an attempt to explain individuals’ willingness to pay (WTP) for public environmental goods. While most studies only take into account a single theory, this article discusses competing theories. These include, in addition to a basic economic model, the theory of public goods, Ajzen’s theory of planned behavior, and Schwartz’s norm-activation model. Empirical results are based on a contingent valuation study of biodiversity in German forests. Multivariate analyses demonstrate that studies using single theories omit crucial explanatory variables and, hence, might be misleading. Economic models of WTP have proven to be incomplete, that is, they have restricted explanatory power and need to be supplemented by psychological and sociological models. Furthermore, a general finding is that factors influencing WTP are different for “in-principle WTP” on the one hand and “amount of WTP (given in-principle WTP)” on the other. Income, for example, does not affect whether individuals are willing to pay at all, but significantly influences how much they are willing to pay.