Multivariate Mixed Models for Open-Ended Contingent Valuation Data: Willingness To Pay For Conservation of Monk Seals

Abstract

Although dichotomous choice (DC) contingent valuation (CV) has been recommended by the US NOAA 'blue-ribbon' panel for large-scale contingent valuation studies, useful information can still be obtained from smaller, open-ended (OE) studies, often undertaken as a precursor to a DC survey. The CV study considered here was carried out in Greece and looked at willingness-to-pay (WTP) for protecting the Mediterranean monk seal (Monachus-monachus) in the Aegean area. This is the most endangered seal in the world, and the application of the CV methodology was the first such application in Greece. The OE data consist of two responses: first, a binary response detailing whether or not respondents were in principle prepared to pay for the protection of this seal; secondly, those respondents who answered 'yes' to the first question were then asked to state their maximum WTP for such protection. A multivariate binomial – log-normal mixture model is used to develop a bid function including explanatory variables such as income, sex, age and education. Such a modelling approach provides an alternative to more commonplace tobit estimation. However, the model is extended to include further information which was collected on:

(a) an increased WTP amount given in response to information that the initial WTP amount may not be enough to prevent the extinction of the seal;

(b) respondents were asked to divide their final WTP amount between use, option and existence values, the latter requiring a multivariate model with four binary and four continuous responses per individual in the same model.

The discussion focuses on the methodological issues raised with some comment on the substantive interpretation of results.