Dichotomous-choice contingent valuation with 'don't know' responses and misreporting

Balcombe, K. and Fraser, I. (2009) Dichotomous-choice contingent valuation with 'don't know' responses and misreporting. Journal of Applied Econometrics, 24 (7). pp. 1137-1152. ISSN 0883-7252 doi: 10.1002/jae.1109

Abstract/Summary

A new approach is presented that simultaneously deals with Misreporting and Don't Know (DK) responses within a dichotomous-choice contingent valuation framework. Utilising a modification of the standard Bayesian Probit framework, a Gibbs with Metropolis-Hastings algorithm is used to estimate the posterior densities for the parameters of interest. Several model specifications are applied to two contingent valuation datasets: one on wolf management plans, and one on the US Fee Demonstration Program. We find that DKs are more likely to be from people who would be predicted to have positive utility for the bid. Therefore, a DK is more likely to be a YES than a NO. We also find evidence of misreporting, primarily in favour of the NO option. The inclusion of DK responses has an unpredictable impact on willingness-to-pay estimates, since it impacts differently on the results for the two datasets we examine. Copyright (C) 2009 John Wiley & Sons, Ltd.