Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments versus Contingent Valuation

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  • The measurement of passive use values has become an important element of environmental economics over the past decade. Damage assessment cases in the U.S. and Canada have prompted considerable research activity in this area, yet the topic is quite controversial and debate over the theory and measurement of passive use values has permeated the economics profession (eg. Hanneman, 1994; Diamond and Hausman, 1994). Much of the controversy surrounds the use of the contingent valuation method (CV) in eliciting passive use values and the various \"issues\" that arise when the technique is employed. There is a substantial literature on the CV method (eg. Mitchell and Carson, 1989; Natural Resource Damage Assessment, 1994) and its advantages and disadvantages. We do not review this literature here, rather we explore the use of another stated preference approach for measuring passive use values, the choice experiment, and compare it to CV. Choice experiments have been employed in the marketing, transportation and psychology literature for some time (Batsell and Louviere, 1991; Louviere, 1988a; 1988b, 1991; Hensher, 1994). They arose from conjoint analysis which is commonly used in marketing and has been applied to natural resource damage assessment. Choice experiments (at times called stated preference methods), however, differ from typical conjoint methods in that individuals are asked to choose from alternative bundles of attributes instead of ranking or rating them. Thus choice experiments are consistent with random utility theory and are an alternative to CV as a method of eliciting passive use values. Researchers have achieved positive results using choice experiments to value the effect of environmental improvements on use values (Adamowicz et al, 1994). In this paper we outline the use of choice experiments (CE) for measuring passive use values and present several potential advantages of this approach. We then develop a particular empirical application, the measurement of value associated with enhancing the population of a threatened species, using both CV and CE methods of valuation. We also combine the information from both techniques in order to test for differences in preferences and error variances arising from the two methods. Our results show that choice experiments have considerable merit in measuring passive use values for the following reasons: (1) the method provided a richer description of the attribute tradeoffs that individuals are willing to make, (2) the CV model error variance was not significantly different than the error variance in the choice experiment model, (3) when combined with CV data we found that the marginal utility of income parameters were not significantly different (when variance heterogeneity is taken into account), and (4) the welfare values from the CE generally have smaller variances (relative to their means) than the CV estimates. These results lead us to suggest that choice experiments may outperform CV methods in applied analysis.

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    Attribution-NonCommercial-NoDerivatives 3.0 International