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Environmental and Resource Economics

, Volume 36, Issue 4, pp 475–497 | Cite as

Repeated Dichotomous Choice Formats for Elicitation of Willingness to Pay: Simultaneous Estimation and Anchoring Effect

  • Jorge E. Araña
  • Carmelo J. León
Article

Abstract

Repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good. In this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process. The model allows us to study the evolution of anchoring effects after the second dichotomous choice question. Estimation involves the Bayesian techniques of Gibbs sampling and data augmentation, and the application focuses on the preservation value of a natural area. The results for a data set involving up to four successive dichotomous choice questions show that restricted multiple-bounded models are rejected by the data with the general model. In addition, willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model. When taking anchoring effects into consideration, it is revealed that individuals’ responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions. Nevertheless, they do not have a significant effect on welfare estimates.

Keywords

anchoring effects Bayesian methods contingent valuation endogeneity repeated dichotomous choice simultaneous equations 

Econlit descritptors

C110 C250 Q510 D120 

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Notes

Acknowledgments

The authors would like to thank the support by projects BEC2000-0435, VEM2004-08558 and SEJ2005-09276 of the Spanish Ministry of Education and useful comments by three anonymous referees. The usual disclaimer applies.

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Copyright information

© Springer Science+Business Media, Inc. 2006

Authors and Affiliations

  1. 1.Department of Applied Economic Analysis, Edificio de EconomicasUniversity of Las Palmas de Gran CanariaLas PalmasSpain
  2. 2.Department of Applied Economic Analysis, Edificio de EconomicasUniversity of Las Palmas de Gran CanariaLas PalmasSpain

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