Abstract:

The Contingent Valuation method and Choice Experiments are popular methods in environmental economics to elicit people's willingness to pay for a positive change in environmental quality or for the prevention of a negative change. However, the most incentive compatible elicitation methods require large samples and expensive surveys to obtain valid results. Therefore, the benefit transfer approach has been suggested, which assigns results from past studies to a new policy site. Unfortunately, most of the suggested methods in the past failed. Recently environmental economists started to look into using Bayesian methods as a tool for the benefit transfer. This contribution explains the principles of the Bayesian Benefit Transfer and demonstrates its applications using data from a Contingent Valuation study and from a Choice Experiment. It can be shown, that the Bayesian benefit transfer succeeds in reducing survey costs by large and facilitates cost-benefit analysis.

KEYWORDS: benefit transfer, bayesian approach, choice experiments, prior choice, power prior