Hypothetical bias in contingent valuation

The three essays in this dissertation address issues pertinent to hypothetical bias in the contingent valuation (CV) mechanism. Empirical evidence gathered through several experiments conducted at the University of Massachusetts, Amherst, is used to provide a better understanding of the cause and nature of hypothetical bias. The first essay is based upon the notion that uncertain responses in stated preference valuation are associated with hypothetical bias. While the relationship between respondent uncertainty and hypothetical bias is not well understood, calibration techniques such as the uncertainty adjustment have been developed to mitigate the bias. Hence this study seeks to fill this gap by uncovering the relationship between hypothetical bias and respondent uncertainty using induced value goods. According to the results there is no relationship between certainty of induced values and either respondent\u27s stated level of certainty or hypothetical bias. The lack of hypothetical bias with induced value goods, but its continual existence in homegrown value goods lays ground for further investigation of the bias in the second essay. By employing both induced value and homegrown value goods, this study seeks to isolate the cause of hypothetical bias. Furthermore, a within-subject design is employed to prevent the infiltration of any individual specific biases. According to the results, hypothetical bias is non-existent with induced value goods but emerges once homegrown value goods are introduced. Hence the value formation process as hypothesized by Taylor, et al. (2001) is identified as a key contributor to hypothetical bias. The third essay explores a relatively new approach to non-market valuation that is based upon a prediction format. Unlike the traditional CV format that asks individuals to state personal values and opinions, this technique inquires about their predictions of other\u27s behavior. Literature in psychology regards these estimates to be less strategic, which could potentially eliminate biases including hypothetical bias. In this study we obtain hypothetical bias in both the traditional CV and the prediction formats. Although prediction estimates were significantly lower, it was observed that individuals are able to correctly predict the magnitude of hypothetical bias in the traditional CV

Willingness to pay towards a public good: how does a refund option affect stated values?

Mandatory taxes and/or voluntary contributions are commonly adopted as the payment vehicle when eliciting willingness to pay (WTP) in environmental valuation studies. While mandatory taxes may arouse negative feelings, voluntary contributions may lead to strategic behaviour (over bidding) or free riding (under bidding). In this paper, we explore an alternative payment vehicle which avoids the draconian undertones associated with taxes and may be more incentive compatible than a voluntary contribution – a tax that incorporates a refund option. The template for such a payment vehicle is the value added tax charged to tourists in Ireland, but which can be reclaimed on exiting the country. In the context of raising public funds to support the conservation of rural countryside landscape, a comparison is made between the elicited WTP via a mandatory tax and that elicited via the alternative payment method incorporating a refund option. While we observe similar participation rates between the two payment methods, the refund option reveals a higher stated WTP

Is there agreement between beneficiaries on who should bear the costs of conserving farm landscapes?

In recent years market based incentives have been regarded as a potential solution for addressing market failure related to environmental externalities. Determining the optimal payment schedule to facilitate such market mechanism typically involves a valuation exercise to capture the static benefits received by beneficiary groups from the public good. In this study we augment the valuation estimates with a notion of 'fair share' by assessing opinions of two beneficiary groups (tourists and Bed and Breakfast owners) regarding an acceptable division of the burden of financing the public good. We find a significant difference in views. Tourists believe that their accommodation providers should contribute almost twice the amount that they themselves are willing to pay. On the contrary, a majority of Bed and Breakfast owners surveyed were against burdening tourists with any additional payments

Can traders help farmers transition towards more sustainable maize based farming systems? Evidence from the Lao-Vietnamese border

Intensive maize cultivation in the uplands of North-west Vietnam has resulted in soil erosion leading to reduced maize yields along with negative impacts downstream. Despite the introduction of sustainable agricultural technologies over many years, adoption rates are low mostly due to their incompatibility with existing farming systems and lack of secure markets for alternative crops. In addition, the temporary nature of development programmes and limited capacity of government extension systems have resulted in limited spread of technology, and where they have been introduced, unable to secure long-lasting commitments from farmers. In this study, we explore an alternative model involving maize value chain actors for attaining more durable transition towards sustainable maize farming systems. We find maize traders operating at lower levels of the value chain with active engagement with the farming community to be best suited for engaging in technology dissemination. While their involvement may require additional incentives and oversight from the government it is imperative that support for commercialization through promising market links are established to achieve a more meaningful shift towards sustainable farming methods