Stated Preference Methods

Passive Use Values

• People are willing to pay for something they don�t �consume.�
• Definition: TV = UV + PUV
• Passive use value cannot be directly observed, only discovered through stated preferences.
• Example: Save the Environment: Drill Baby Drill

Contingent Valuation

• For some public goods, there are no obvious ways to determine preferences through observation of behaviors. In these cases, there may be no alternative to asking a sample of people questions about their valuations. These surveys are called contingent valuation (CV) surveys.
• The primary use of CV is to elicit people�s Willingness-to-Pay (WTP) for changes in the quantity of a good. Valuing �use� or �potential use� goods with CV is relatively non-controversial. Valuing passive use (nonuse) goods with CV is more controversial.

CV Method

• Identify a sample of respondents from the population.
• Ask respondents questions about their valuations of a good.
• Estimate respondents' WTP for the good using information from the survey.
• Extrapolate the results to the entire population.
• An Example: A North Carolina Green Energy Program | paper link

Direct Elicitation (Non-Referendum) Methods

• Open-Ended Questions
• Close-Ended Iterative Bidding Method
• The Dichotomous-Choice (Referendum) Method

Design Issues

• Payment vehicle
• Policy implementation rule

Survey Administration

• In person
• Telephone
• Mail
• Internet

Sample and Non-Sample Biases

• Random samples
• Non-response bias
• Sample-selection bias

Problems and Issues

• Neutrality
• Noncommitment (i.e., hypothetical) bias
• Order Effect
• Embedding (i.e., scope) effect
• Starting point bias (i.e., anchoring)
• WTP versus WTA

Accuracy

• Convergent validity: Carson, et al. Land Economics, 1996 [NCEE summary]
• Construct validity: List and Gallet, Environmental and Resource Economics, 2003 [SpringerLink]

Other Stated Preference Methods

• Contingent behavior
• Conjoint analysis / Choice experiments: An example
• Contingent ranking

Calibration

• Survey design: cheap talk, certainty ratings
• Combining revealed and stated preference methods