Peter Elsasser

The neglect of possible disutility as a bias source in the contingent valuation of public goods

23 pages · 4.50 EUR
(October 2007)

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Abstract:

Economic valuations of environmental amenities often rely on the tacit assumption that an improved supply will solely enhance utility. If consumption, however, is unavoidable, an improved supply can cause disutility to some consumers. If this is being neglected, value estimates will be biased upwards. After reviewing the literature on the disutility problem, this chapter presents an empirical contingent valuation study which elicited the monetary value of a forest biodiversity protection programme through the use of an open-ended question/payment card valuation approach. Proponents of the programme were asked for their willingness to pay (WTP) to implement the programme, and objectors were asked for their WTP to prevent it. The bias, which would have been induced if the negative and zero values identified in the study had been ignored (or if they had been replaced by customary assumptions) is then investigated. Under specific assumptions this bias amounts to more than 100 %. Finally, it is demonstrated that applying a Turnbull “lower bound” estimation in a referendum type contingent valuation would not have cured the upwards bias which is induced if disutility is ignored.

KEYWORDS: contingent valuation; bias; disutility; negative WTP; forest biodiversity