Abstract
We evaluate the sensitivity of distance decay in individuals’ stated willingness to pay (WTP) for water quality improvements in eutrophied lakes. We extend the standard model of contingent valuation (CV) by allowing individuals to adopt a sequential evaluation process consisting of two decision stages. In the first stage respondents decide whether they are ‘protesters’, have a WTP \(=\) ‘true zero’ or a \(\hbox {WTP}>0\). Conditioned on a strictly positive WTP, we use Lee’s selectivity-corrected model to determine the magnitude of their WTP in the second stage. Using CV survey data from Norway we find significant distance decay in the first stage classification of respondents as ‘protesters’, ‘true zero’ WTP, or positive WTP. In the second stage model for positive WTP responses, we find little or no significant relationships when correcting for selection. Results suggest that previous findings of significant distance decay in contingent valuation of lake and river water in Europe may be driven by the definition of ‘protest’ and ‘true zero’ respondents. We find that WTP for water quality may be more useful as a qualitative indicator of political support for user financed water quality measures, than as a cardinal measure of marginal utility of water quality improvements.
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Notes
We use inverted commas throughout the paper to highlight that the definition of these concepts are not fixed, but defined by the analyst’s coding of WTP follow-up questions and often vary from study to study.
See Strazzera et al. (2003) for a review.
Carson and Hanemann (2005) argue that it has been more common to assign a “low” value to ‘protest’ responses when the response format is continuous.
Strazzera et al. (2003) is an early exception as they control for non-randomness by using a selection model that distinguishes between ‘protesters’ and remaining respondents in the first stage. Garcia et al. (2009) extend this framework and consider that non-randomness in the final sample may be subject to double selection: ‘protesters’/non-‘protesters’ and users/non-users.
The notation for ln-transformation of the dependent variable is suppressed in all equations.
We also estimated (1) and (2) using Tobit models and the estimates were identical for all practical purposes.
Monte-Carlo simulations have shown that selection mechanisms based on the multinomial logit perform well even when the assumption of independent categories is violated (Bourguignon et al. 2007)
Models were estimated with the 5 % lowest and highest values excluded, quantile regressions were used to check for heterogeneous responses to changes in explanatory variables and the appropriateness of non-linear transformations of explanatory variables were evaluated using multivariable fractional polynomial algorithms.
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Acknowledgments
The study was conducted under EU DG Research F6 project AquaMoney (SSPI-022723) (www.aquamoney.org), with additional funding for data analysis from the EUTROPIA project funded by MILJØ2015 programme of the Norwegian Research Council. A special thanks to AQUAMONEY colleagues, and particularly to Roy Brouwer (IVM) and Ian Bateman (UEA) for coordinating the AQUAMONEY project and water quality common design group, respectively.
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Söderberg, M., Barton, D.N. Marginal WTP and Distance Decay: The Role of ‘Protest’ and ‘True Zero’ Responses in the Economic Valuation of Recreational Water Quality. Environ Resource Econ 59, 389–405 (2014). https://doi.org/10.1007/s10640-013-9735-y
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DOI: https://doi.org/10.1007/s10640-013-9735-y
Keywords
- Non-market valuation
- Stated preference
- ‘Protest’ ‘true zero’ responses
- Methodology
- Water quality
- Disproportionate cost
- EU Water Framework Directive