Pick a number, but not just any number: valuation uncertainty and maximum willingness to pay

ABSTRACT

Empirical results suggest that contingent valuation method (CVM) respondents are uncertain of their valuations, which has led critics of the method to raise issues about its validity. Alternative approaches to resolve the problem have been proposed, involving different willingness to pay (WTP) response formats allowing respondents to explicitly express uncertainty. This paper compares differences between certain and uncertain responses for four different response formats. The results suggested that mean and median (WTP) were not significantly different for respondents who were certain about their valuations. This was generally not the case for respondents who were uncertain about their valuations. However, the median WTP was not found to be significantly different for uncertain and certain respondents. A conclusion for a standard CVM application is that the sample median WTP value could serve as a proxy measure of population maximum mean WTP when uncertainty has been removed.

KEYWORDS:

• Contingent valuation
• willingness to pay
• valuation uncertainty
• response format
• outdoor recreation

Acknowledgments

We would like to thank Jan-Eric Englund, Swedish University of Agricultural Sciences, for valuable statistical advice. Leif Mattsson and Johan Norman, Swedish University of Agricultural Sciences, are gratefully acknowledged for valuable comments on earlier versions of this manuscript. Helpful comments and discussions were provided by participants at the 17th EAERE Conference (Amsterdam, the Netherlands, 24–27 June, 2009), the 16th Ulvön Conference on Environmental Economics, 16–18 June, 2009, Ulvön, Sweden, and seminar participants at Center for Environmental and Resource Economics (Umeå, Sweden, 9 November 2011) and The University of the West Indies (St. Augustine, Trinidad, 14 May 2012). The authors are solely responsible for the contents of the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The research was financially supported by the research programmes ‘Sustainable Management in Hardwood Forests’ (multiple funding sources), ‘Outdoor Recreation in Change’, funded by Swedish Environmental Protection Agency,and ‘Broadleaves for the Future’(multiple funding sources).