Contingent Valuation

Assumes preferences are defined over resources and their condition

Don’t assume the preferences are defined by different ways a resource might be damaged.

Example: One’s valuation of a beach should not change whether it has been oiled or pristine.

How contingent valuation studies are done

Surveys asking people how much they are willing to pay to change the condition of a resource. (Hypothetical)

Nonuse values:

(1) Values held by an individual related to the individual’s own use

(2) Values held by an individual related to the use by others

(3) Values held by individuals that are not connected to human use.

(Examples: Grand Canyon; a lake in Northern Ontario; nearly extinct species; non-endangered species)

Criticisms of Contingent Valuation

People are asked to evaluate commodities they have never purchased or never thought of purchasing. Therefore people don’t know how to place a value on them.

Perception of fairness: the way in which the cost for repair is given changes people’s answers on survey questions (increased taxes; gasoline price increase; utility price increase). This suggests that people are performing benefit-cost analysis rather than describing environmental concern.

Opaluch and Grigalunas (1991) study: with environmental issues we get primarily ethical answers and no true preferences. So answers on surveys are seen as expressions of ethical values, not descriptions of preferences.

People may advocate a government action that goes against personal self-interest because it coincides with their ethical views. Thus, respondents to surveys may also include ethical components as well preferences.

Questionnaire design: There are no other measures for nonuse values that bring into question checking for validity of the studies.

When people were asked how they came up with their answer some stated they simply made up a number or guessed. (one fifth of respondents)

Implausible responses: some individuals say they are willing to pay several thousand dollars even though they were not wealthy and probably could not pay the amount.

People are confused about the nature of the survey and don’t distinguish between a particular resource and the general environment. (Example: people thought that a contribution included general environmental causes)

Discrepancy between attitudes and actual behavior. People may be expressing concern for a general environmental issue rather than an actual willingness to make a monetary donation. May measure intentions (attitudes) rather than actual behavior.

Inconsistency in willingness to pay and willingness to accept: Willingness to accept usually far exceeds willingness to pay. (Example: How much would you be willing to pay to avoid instant death? How much would you have to be paid to accept instant death)

Value estimates of the parts don’t equal value estimates of the whole: Wilderness Study - People were asked their WTP for protecting a number of different areas of forests. They were then asked their WTP for three areas together. The WTP for all three areas was less than the WTP for each separate area added together. This is attributed to purchase of moral satisfaction by supporting good causes rather than preferences over resources.

Bimodal effect from survey results. Typical surveys produce large numbers of zeros and a large number of sizable numbers.

The "warm glow" effect: theory that survey results don’t measure preferences but do measure pleasure in giving to a good cause. People also spread out their giving over a considerable number of charities, suggesting the act of donating is akin to satisfaction – and not a preference for the resource.

Contrast Effects

When told to rate a series of stimuli a person will perceive the stimulus one way, then, in another situation the "same" stimulus may be seen very differently when contrasted against another set of stimuli.

People in general do not perceive and remember material in isolation; they interpret new information in light of past experience and the context in which the material occurs.

This is similar to perceptual illusions (such as the ones presented in class).

Early studies of this include the 1958 study by Sherif et al. that found that when subjects initially lifted a heavy weight, they subsequently rated relatively lighter weights as lighter than they actually were.

Contrast Effects and Their Relationship to Subsequent Behavior by SHERMAN et al. (1978)

RESULTS: subjects thought recycling was more important when presented with more trivial issues (leash laws, for pets, required trash can lids), and less important when in the context of nontrivial issues (abortion laws, capital punishment).

In the high salience group, subjects in the trivial questionnaire condition took more pamphlets than subjects in the nontrivial questionnaire condition. In the low salience group, subjects in the nontrivial questionnaire condition took more pamphlets than subjects in the trivial questionnaire condition. The results for the low saliency group were the same as the results for the no initial rating group.

Bohm. et al. (1996): Instrumental or emotion evaluations: What determines preference?

Two evaluative aspects:

INSTRUMENTAL

focus entirely on consequences
evaluate them solely with respect to the degree of goal attainment

EMOTIONAL

there exist multiple aspects of a decision problem one can focus on
these aspects elicit multiple emotions
because emotions can be understood as valence reactions, it is justified to speak of emotional evaluations and of an emotional focus.

1) Manipulation of situational context can induce subtle changes in subject's evaluations and preference.

2) Preferences can be satisfactorily predicted by instrumental and emotional ratings.

MORE SPECIFICALLY:

1) Consumer goods are more preferred in the private than in the public condition.

2) Socially valued options are more preferred in the public than in the private condition.

Sansone, et al (1992)

What maintains a person's everyday recycling behaviors?

Results

Things that correlated with high-frequency recyclers:

-- Involved their children in the process

-- personal satisfaction which people experience when recycling

-- feeling of doing something good for the environment

-- made recycling a part of their routine

Discussion: The latter group (high-frequency recyclers) redefined the task by focusing on the positive feelings gained from recycling rather than on the specific actions of recycling.

Hint: "It is a lot easier to maintain behavior if one can identify and focus on its positive phenomenal features"

Conclusions

Attitudes don't necessarily translate into actions (behaviors)
Surveys may be measuring people's morals, ethics, and satisfaction rather than values of nonuse resources
People don't have experience placing values on nonuse resources
Low internal validity and low reliability: inconsistency in people's responses (responses vary when questions are phrased differently)
Currently no other way to measure nonuse values (low validity)