Embedding a Field Experiment in Contingent Valuation to Measure Context-Dependent Risk Preferences: Does Prospect Theory Explain Individual Responses for Wildfire Risk?

This paper contributes towards the development of an empirical approach applicable to contingent valuation to accommodate non-expected utility risk preferences. Combining elicitation approaches used in field experiments with contingent valuation, we embed an experimental design that systematically varies probabilities and losses across a survey sample in a willingness to pay elicitation format. We apply the proposed elicitation and estimation approaches to estimate the risk preferences of a representative homeowner who faces probabilistic wildfire risks and an investment option that reduces losses due to wildfire. Based on prospect theory, we estimate parameters of probability weighting, risk preferences and use individual characteristics as covariates for these parameters and as utility shifters. We find that risk preferences are consistent with prospect theory. We find that probability weighting may offer an explanation for respondents’ observed under investment in measures to reduce losses due to wildfire.Prospect theory; Contingent valuation; Field experiment, Wildfire risk

Invasive Weeds, Wildfire, and Rancher Decision Making in the Great Basin

A numerical dynamic model is developed to characterize the decision problem of a rancher operating on rangelands in northern Nevada that are affected by invasive annual grasses and wildfire. The model incorporates decisions about herd size management of a cow-calf operation and fuels treatment to reduce the size of rangeland wildfires. Currently, high transactions costs to obtain permits to implement land treatments on federally-owned rangeland appear to limit rancher involvement. The results of the model suggest that, even if the transactions are removed, ranch income motives alone are likely insufficient for private ranchers to adopt preventative land treatments. The current treatment cost ($20 per acre at the minimum) appears to be prohibitively expensive relative to the benefits derived from the treatments under the low-productivity, semi-arid rangeland conditions.Rangeland management; Stochastic dynamic programming; Ranching; Wildfire; Invasive grasses; Rangeland ecosystem benefits; Cow-calf operation

Latent Thresholds Analysis of Choice Data with Multiple Bids and Response Options

In many stated preference settings stakeholders will be uncertain as to their exact willingness-to-pay for a proposed environmental amenity. To accommodate this possibility analysts have designed elicitation formats with multiple bids and response options that allow for the expression of uncertainty. We argue that the information content flowing from such elicitation has not yet been fully and efficiently exploited in existing contributions. We introduce a Latent Thresholds Estimator that focuses on the simultaneous identification of the full set of thresholds that delineate an individual's value space in accordance with observed response categories. Our framework provides a more complete picture of the underlying value distribution, the marginal effects of regressors, and the impact of bid designs on estimation efficiency. We show that the common practice of re-coding responses to derive point estimate of willingness-to-pay leaves useful information untapped and can produce misleading results if thresholds are highly correlated.Stated Preference; Multiple Bounded Elicitation; Polychotomous Choice; Bayesian Estimation; Value Uncertainty

Willingness to Pay Estimation When Protest Beliefs are not Separable from the Public Good Definition

Public good attributes that are correlated with protest beliefs but not separable from the good's value, would affect stated preference estimates of the WTP for the public good. Survey data collected to value a program to prevent ecosystem losses on Nevada rangelands, where the majority of land is publicly owned and managed, reveal more than half of the respondents exhibiting some protest belief. Of these, about 60% voted 'yes' to some nonzero bid amount. By treating protest beliefs and opposition to the proposed program as separate concepts, we systematically analyze their determinants and impacts on WTP. In this framework, people with protest beliefs may or may not vote 'no' to all bids and people may, without being protesters, answer 'no' to all dollar amounts. Multinomial logit regression results suggest that factors motivating people to protest and/or oppose the proposed program are so diverse that a single model does not provide a good fit. We estimate nested models and conclude that different underlying processes determine WTP for "protesters" ($34.02) and "non-protesters" ($69.56).Stated preferences; Willingness to pay; Protest responses; Rangelands; Valuation of ecosystem services

Invasive Weeds, Wildfire, and Rancher Decision Making in the Great Basin

In this article, a numerical stochastic dynamic programming model (SDP) is developed to characterize the decision problem of a rancher operating on rangelands in northern Nevada that are affected by invasive annual grasses and wildfire. The model incorporates decisions about herd size management of a cow-calf operation and fuels treatment to reduce the size of rangeland wildfires. Currently, high transactions costs to obtain permits to implement land treatments on federally-owned rangelands appear to limit rancher involvement. The results of the model suggest that ranch income motives alone are likely insufficient for private ranchers to adopt preventative land treatments. The current treatment cost ($20 per acre at the minimum) appears to be prohibitively expensive relative to the benefits derived from the treatments under the low-productivity, semi-arid rangeland conditions.stochastic dynamic programming, cow-calf operation, rangeland, ecosystem, Livestock Production/Industries, Resource /Energy Economics and Policy,

Investment in Infectious Disease Control Capacity: The Case of a Potential Foot-and-Mouth Disease Outbreak in California

Health Economics and Policy,

Estimating Expected Fire Suppression Cost Savings due to Vegetation Management on Pinyon Pine and Juniper Invaded Sagebrush Rangelands

Wildfire suppression costs in the United States have increased steadily over the last decades (Stephens and Ruth 2005, Calkin et al. 2005, Gebert et al 2007, Westerling et al. 2006, GAO 2007), with related expenditures by the U.S. Forest Service and Bureau of Land Management exceeding a billion dollars per year in four out of the seven years leading up to 2006 (Gebert et al 2008). Pre-­fire vegetation management on public lands is recognized as an important tool for reducing expected wildfire suppression costs (GAO 2007).Using data from wildfire suppression costs across the US, Lankoande and Yoder (2006) estimate that each dollar spent on fire suppression reduces damage by 12 cents; while each dollar spent in pre­‐fire preparedness yields a return of $3.76 in fire suppression cost reduction. Information of this type is necessary for cost­‐effective public lands management. However, to date there is no similar information about the economic returns from fuels treatments on Great Basin rangelands. This research brief describes one part of an economic study being conducted through the SageSTEP project (McIver et al 2010; Rollins, Kobayashi and Taylor 2010) that estimates the economic benefits of pre­‐fire fuels treatment on sagebrush rangelands

Estimating Private Incentives for Wildfire Risk Mitigation: Determinants of Demands for Different Fire-Safe Actions

In this article we develop a general conceptual model of a property-owner’s decision to implement actions to protect his property against wildfire threat. Assuming a prospective-utility maximizing decision maker, we derive a system of demand functions for fire-safe actions that characterizes factors affecting individual decision making. We then empirically estimate the demands for various fire-safe actions functions using survey data of property owners facing a wildfire threat in Nevada. We find that the probability of individuals implementing some fire-safe action increases with value of the residence, previous experience with wildfire, the property being used as the primary residence, positive attitude towards wildfire management methods on public lands, and connectedness of community members. A lower probability of implementing fire-safe actions is found for those who value pristine nature and privacy that nature provides.Risk and Uncertainty,

Strategic Incentives in Biosecurity Actions: Theoretical and Empirical Analyses

We model a game between two players taking biosecurity actions and characterize the Nash equilibria and their properties for the cases of strategic complements and substitutes. Implications of the theoretical model are investigated using data for biosecurity behavior among producers participating in a livestock exhibition. Biosecurity actions with own benefits and lasting impacts in home communities exhibit a positive relationship with behavior of the producers from geographically close areas. The number and probabilities of biosecurity actions taken by exhibitors are positively associated with the number of animals exhibited and they vary among commercial and hobby producers and across species/types of commercial production.California, livestock disease, livestock exhibition, strategic complements, strategic substitutes, Agribusiness,

Sensitivity of WTP Estimates to Definition of \u27Yes\u27: Reinterpreting Expressed Response Intensity

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