Conservative dichotomous choice responses in the active policy setting: DC rejections below WTP

Michael C. Farmer, Clifford A. Lipscomb

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

An important feature of a Contingent Value (CV) study is that researchers design a survey that guides respondents to answer dichotomous choice (DC) questions as if they represent once-and-for-all choices. Researchers frequently construct hypothetical markets to satisfy this condition; yet detractors assert that 'hypotheticality' leads inevitably to inflated DC responses. For active policy questions, however, some respondents may suspect that a CV informs an actual policy issue; so to reject a DC might induce the policy-maker to reintroduce the policy with a price reduction or a program improvement. With potential incentives to deflate a DC response when policies are active, we locate two types of respondents that represent two different incentives. One class is expected to be able to risk permanent rejection of a waiver from one automobile emissions inspection. This class more frequently rejects a DC value known to improve existing conditions. Another respondent class is expected to be risk averse to defeat of the program or to excessive delay. Predictably, these respondents more frequently accept a DC value that represents a known gain. Conservative DC responses have implications for the use of CV in active policy contexts, opening a role for theory to assist practitioners in these circumstances.

Original languageEnglish
Pages (from-to)223-246
Number of pages24
JournalEnvironmental and Resource Economics
Volume39
Issue number3
DOIs
StatePublished - Mar 2008

Keywords

  • Contingent valuation
  • Multinomial logit
  • Referendum incentives

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