Accounting for Respondent Uncertainty to Improve Willingness-to-Pay Estimates

Abstract

In this paper we develop an econometric model of willingness to pay that integrates data on respondent uncertainty regarding their own willingness to pay. The integration is utility consistent and does not involve calibrating the contingent responses to actual payment data, and so the approach can "stand alone". In an application to a valuation study related to whooping crane restoration, we find that this model generates a statistically lower expected WTP than the standard CV model. Moreover, the WTP function estimated with this model is not statistically different from that estimated using actual payment data, suggesting that when properly analyzed using data on respondent uncertainty, contingent valuation decisions can simulate actual payment decisions. This method allows for more reliable estimates of WTP that incorporates respondent uncertainty without the need for collecting comparable actual payment data.