Using Labels to Investigate Scope Effects in Stated Preference Methods

Article

Abstract

Insufficient sensitivity to scope (variations in the scale of the environmental good on offer) remains a major criticism of stated preference methods, and many studies fail a scope test of some sort. Across a range of existing explanations for insensitivity to scope (commodity mis-specification, embedding, warm glows) there seems to exist no clear conclusion on how to deal with the problem. This paper provides an alternative explanation for insufficient sensitivity to scope, based on re-definition of the determinants of value for environmental goods within an attributes-based choice model. In the proposed framework respondents’ Willingness To Pay need depend not only on physical characteristics of a good, but may also depend on the ‘label’ under which the environmental good is ‘sold’ in the hypothetical market. To investigate this problem, a Choice Experiment study of biodiversity was conducted. We find that controlling for the effects of a label—in this case, national park designation—leads to significant increase in the scope sensitivity of welfare measures.

Keywords

Scope test Embedding Warm glow Label effect Choice experiment Contingent valuation Biodiversity valuation National park 

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Copyright information

© Springer Science+Business Media B.V. 2009

Authors and Affiliations

  1. 1.Warsaw Ecological Economics CenterUniversity of WarsawWarsawPoland
  2. 2.Economics DepartmentUniversity of StirlingStirlingUK

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