Article1995

Statistical Approaches to the Fat Tail Problem for Dichotomous Choice Contingent Valuation

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Economic and Environmental Valuation Decision-Making and Behavioral Economics Socioeconomics of Resources and Conservation

Abstract

If a cumulative density function estimated from dichotomous choice data has an unrealistically fat right-hand tail, mean willingness to pay (WTP) will be overestimated. Truncating the range of integration results in a lower-bound estimate of the true mean WTP. A normalization procedure proposed by Boyle, Welsh, and Bishop (1988) unnecessarily depresses the estimate further. A new statistical approach is presented that allows a best-guess estimate of mean WTP. Because this estimate involves extrapolation beyond the range of the data, it tends to be highly variable.

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References

1989Using surveys to value public goods: the contingent valuation method 1984Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses 1986On Approximating the Statistical Properties of Elasticities 2014The Measurement of Environmental and Resource Values 1979Measuring Values of Extramarket Goods: Are Indirect Measures Biased?1988A new paradigm for valuing non-market goods using referendum data: Maximum likelihood estimation by censored logistic regression 1990A Non-Parametric Approach to the Estimation of Welfare Measures in Discrete Response Valuation Studies 1991Confidence Intervals for Evaluating Benefits Estimates from Dichotomous Choice Contingent Valuation Studies

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2003Attitude and belief questions as a source of context effect in a contingent valuation survey 2000Efficiency Gains Afforded by Improved Bid Design versus Follow-up Valuation Questions in Discrete-Choice CV Studies

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