Measuring marginal willingness to pay using conjoint analysis and developing benefit transfer functions in various Asian cities

ABSTRACT

We need a consistent methodology to measure the co-benefits of climate change mitigation across Asian countries. This study chose a strategy of modifying the Japan-specific life-cycle impact assessment method based on endpoint modeling (LIME) for wider application across countries. LIME has two dimensions. First, it is an environmental science that links the cause-and-effect chain. Second, it is an environmental valuation that weighs four endpoint damages in monetary terms through a conjoint analysis that is derived from an Internet-based questionnaire survey. This article describes the modification of the methodology for application of the conjoint analysis to weigh environmental impacts. We approached the investigation as follows. First, we conducted Internet surveys to measure marginal willingness-to-pay (MWTP). We used a sample of 112 respondents in their 20 s to 40 s, divided equally between men and women, in 11 cities across China, India, and Southeast Asia. The results obtained showed clear statistical significance and were comparable across the cities. Second, we attempted to develop functions (called benefit transfer functions) to simplify the measured MWTP in order to apply it across different Asian countries. The functions were derived through a stepwise meta-analytic method, a type of multiple regression analysis whose independent variable was MWTP and dependent variables were attributes of both respondents and surveyed cities. The functions showed that coal consumption and percentage of nature reserve were dependent variables. Then, the MWTPs estimated from the functions were compared with the measured MWTP for transfer error, which is calculated by the absolute value of the difference between the estimated value and the measured value divided by the latter. The transfer error was below 50% in about 90% of the 44 results (a combination of four endpoints and 11 cities), implying that the developed functions were statistically significant.

KEYWORDS:

• Life cycle assessment
• Internet survey
• conjoint analysis
• marginal willingness to pay (MWTP)
• benefit transfer

Acknowledgements

Authors in AIST express their sincere thanks to Professor Yohji Uchiyama for his supervision. The authors also appreciate companies who sincerely contributed to their social surveys. The first author would like to appreciate Professors Taro Ohdoko (Dokkyo University) and Masayuki Sato (Kobe University) for lecturing benefit transfer. He also thanks Dr. Jianguo Liang, Mrs. Hisayo Tsujimoto, and Mrs. Rieko Yasuoka for their great help in this work.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Co-benefits is defined as follows in p812, IPCC-AR5 WG3 reports (IPCC 2014); ‘The positive effects that a policy or measure aimed at one objective might have on other objectives, without yet evaluating the net effect on overall social welfare. Co-benefits are often subject to uncertainty and depend on, among others, local circumstances and implementation practices. Co-benefits are often referred to as ancillary benefits.’

2. Generally, survey methods include face-to-face interviews, central location tests, and telephone, mail, and Internet surveys. The telephone survey was ruled out because of the use of figures in the questionnaire (see Figure 1). The most desirable methods are face-to-face interviews and central location tests, but they are costly (Dentsu Communication Institute 2008). While both mail and Internet surveys are rather expensive, the Internet survey involves less expenditure and effort compared with the mail survey because of the rapid increase in Internet penetration among the population.

3. Direct statements of willingness to pay for something cannot be used to determine payment levels from questionnaires for the conjoint analysis because the monthly income of respondents themselves or the household is unknown. Instead, we use indirect methods for monetary attributes such as donation, contributions to reliable international organizations, and tax. In our 2006 survey (Itsubo et al. 2012) in Japan, tax was used for monetary attributes.

4. This resource was excluded in the 2010 survey to reduce the burden on respondents. Therefore, the findings presented in this paper do not include the 2010 survey results.

5. Chattopadhyay (2003) displays more general expression of the transfer error.

Additional information

Funding

This research is funded by the ‘Global Environment Research Fund (E-1001)’ of the Ministry of the Environment of Japan.