Minimax D-optimal designs of contingent valuation experiments: willingness to pay for environmentally friendly clothes

Abstract

This paper demonstrates how to plan a contingent valuation experiment to assess the value of ecologically produced clothes. First, an appropriate statistical model (the trinomial spike model) that describes the probability that a randomly selected individual will accept any positive bid, and if so, will accept the bid A, is defined. Secondly, an optimization criterion that is a function of the variances of the parameter estimators is chosen. However, the variances of the parameter estimators in this model depend on the true parameter values. Pilot study data are therefore used to obtain estimates of the parameter values and a locally optimal design is found. Because this design is only optimal given that the estimated parameter values are correct, a design that minimizes the maximum of the criterion function over a plausable parameter region (i.e. a minimax design) is then found.

Keywords:

• minimax optimal design
• contingent valuation experiment
• logistic model
• trinomial spike model
• H-algorithm

Acknowledgement

We want to thank two anonymous reviewers for contributing to this paper.

Funding

Funded by a grant from the Swedish Research Council.

Notes

^†Both authors equally contributed to this paper.