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Environmental and Resource Economics

, Volume 39, Issue 3, pp 223–246 | Cite as

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

  • Michael C. Farmer
  • Clifford A. Lipscomb
Article

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.

Keywords

Contingent valuation Referendum incentives Multinomial logit 

JEL Classification

C25 D78 Q58 

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Copyright information

© Springer Science+Business Media, Inc. 2007

Authors and Affiliations

  1. 1.Department of Agricultural and Applied EconomicsMS 2132 Texas Tech UniversityLubbockUSA
  2. 2.Department of Marketing and Economics, Langdale College of Business AdministrationValdosta State UniversityValdostaUSA

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