Abstract
This chapter details the approaches used to estimate the value of non-market goods and services attributable to the scenarios. The natural science team of the research project carried out detailed experiments at the power plant, in order to assess how a changed flow would affect fish ecology. In fact, the perturbations or scenarios under study were implemented in a test run and the ecological consequences thus monitored live on site. A contingent valuation experiment was undertaken using a web-based survey instrument. The contingent valuation study targeted respondents in the municipality affected by the considered perturbations in water flows. It was preceded by a focus groups analysis and the on-site ecological assessment described above. These two studies were basic ingredients in the scenario development. A key issue in any survey is the elicitation architecture, i.e. the way of eliciting information from the respondent. We argue that self-selected intervals provides a rich picture of response uncertainty, potentially increase response-rates and maintains a link to recent ideas on coherent arbitrariness. We implemented this approach in the present study by allowing the respondents to choose between a point and a self-selected interval. Thus, if they could not answer the valuation question with a point estimate (as our theory does suggest), they were then asked to submit the answer as an interval. In other words, we assume that true WTP is either stated as a point or contained in the reported interval. The econometrics of this approach is discussed and different estimators are introduced and their properties are compared. Finally, the chapter addresses some other non-priced items, such as the cost of emissions caused by replacement power (assumed to be provided by coal-fired plants).
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Notes
- 1.
There are other methods than those covered here, for example, benefits transfer and dose-response functions. The reader is referred to a textbook in environmental economics for coverage of such methods but see also below.
- 2.
It has been argued that the random utility model (RUM) is superior to the hedonic travel cost model. Reference [150] provides a detailed comparison of the models.
- 3.
For more specialized treatments on how to deal with the many practical issues using direct approaches, see e.g. [8] and [9]. Books that focuses more on the econometric aspects include [71] and [130]. A perspective on the enormous research output in valuation and its relatively scant influence on policy is given by [1].
- 4.
Such approaches involve benefits transfer, where, for example, values have been estimated for one location and are “transferred” to another location, possibly in another country, and the use of dose-response functions that provide estimates of the relationship between the dose or size of a pollutant and its impact on morbidity or mortality.
- 5.
We did experiment with such a scenario in the focus groups, but found that it is not easy to explain such a scenario to a respondent.
- 6.
A compact survey of many issues in survey research, in particular regarding response errors and biases across formats is given in [136].
- 7.
The NOOA-panel on contingent valuation has been influential in this regard. Focussing damage assessments of oil-spills in a litigation context, the panel concluded that contingent valuation serves as a useful starting point if, inter alia, binary valuation questions are used.
- 8.
Reference [134] and [172]. A candid review of these early and very influential papers is provided by [122]. In particular, Kyle’s review suggests that the extent to which individual’s use heuristics for substantive decisions is unclear.
- 9.
For a general account of how “questions shapes the answers”, see [160].
- 10.
see http://hrsonline.isr.umich.edu/modules/meta/2008/core/qnaire/online/16hr08P.pdf, HRS 2008, SECTION P, EXPECTATIONS, PAGE 11, FINAL VERSION, 9/28/2009.
- 11.
There is also a literature using Bayesian analysis. For an application in our context, see e.g. [54]
- 12.
For a discussion of a non-parametric ML see [11].
- 13.
It was argued that the Wyoming State Legislature in 1985 accomplished substantially the same objectives. Source http://ballotpedia.org/wiki/index.php/Wyoming_Preserve_Minimum_Instream_Flows_Initiative_(1986)
- 14.
An extreme outlier has been deleted from the data. The stated WTP exceeded the individual’s reported income by a significant amount. While it is possible, in principle, for this individual to borrow on the market to finance his contribution, we assume that the reported sentiment does not reflect true WTP. The reported value is 1779 standard deviations from the mean. If the WTP-distribution is normal with the estimated means and standard deviations, the probability of finding such an observation is much less that 10 − 22. We also deleted an observation where an individual said he (or she) was willing to pay, but refused to state a point or an interval.
- 15.
The mixed Weibull-exponential model gave rather similar results, with an estimated mean of 444.
- 16.
See http://ecoweb.ier.uni-stuttgart.de:80/ecosense_web/ecosensele_web/frame.php. This web-based tool can be used to replicate the externality costs presented in this book.
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Johansson, PO., Kriström, B. (2012). Towards Empirical Measurement of Externalities. In: The Economics of Evaluating Water Projects. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-27670-5_5
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