Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent

Gibson Institute for Land, Food and Environment Institute for a Sustainable World

Internal Consistency in Double Bounded Dichotomous Choice Contingent Valuation:

Use of Explicit Decision Rules and Sequential and Advance Revelation Learning Design

(LDCV)

Claudia D. Aravena Novielli*a

Fredrik Carlsson b

W. George Hutchinson a

Dave Matthews a

a. Queen’s University Belfast b. University of Gothenburg

Camp Resources XVII Wilmington, June 24-25, 2010


Introduction

Double Bounded Dichotomous Choice Contingent Valuation

Anomalies

Differences between SB – DB (SBDBDiff)

Advance Revelation

Explicit Decision Rules


Introduction

• Elicitation Format: Double Bounded Referendum

WTP

1000?

WTP

250?

WTP

500?

YES

NO

NO

NO

YES

YES YY

YN

NY

NN


Background

• Hannemann et al.1991 popularized DBDC while recognize the DBDCDiff (MWTPSB > MWTPDB).

• Carson et al 2009 and Deshazo 2002 outline 7 explanations for the SBDBDiff.

• Carson et al. 2009 describes the Difference as stereotypical facts

• JEEM 2008 following Matthews et al. 2003 develops a simple test for the significance of the SBDBDiff using resampling methods.


Introduction

• JEEM 2008 SBDBDiff reduces in repeated valuations by Institutional Learning (LDCV).

• JEEM 2004 Introduce Advance Revelation. We use this to effect Institutional Learning and find SBDBDiff is reduced (ARLD).

• We combine Advance Revelation with repeated valuations affecting more reduction in SBDBDiff

• JEEM 2009 in a lab experiment used a Decision Rule to clarify outcomes of the second vote and removed SBDBDiff .

• In a field CVM we combine Advance Revelation with the Decision Rule and test removal SBDBDiff .


Design of the Study

• Contingent Valuation Method

• Frame: WTP for Renewable Energy sources

• Sequential valuations with 2 baselines: – Renewable Energies instead of Hydropower – Renewable Energies instead of Fossil Fuels.

• 3 Split Samples Treatments: (1100 interviews)

– Sample 1: Control treatment– Sample 2: Advance Revelation (AR) treatment– Sample 3: Advance Revelation + Decision Rule treatment (DR)


Design of the Study and Hypotheses

RE instead of HE (1st Valuation) RE instead of TE (2nd Valuation)TREATMENT SB DB SBDB Diff SB DB SBDB Diff

Control

AR

AR+DR

> >SBDB Diff


Design of the Study and Hypotheses

RE instead of HE (1st Valuation) RE instead of TE (2nd Valuation)TREATMENT SB DB SBDB Diff SB DB SBDB Diff

Control

AR

AR+DR

> >SBDB Diff


Objective

• Re test LDCV (reduction in the SBDBDiff ) and SE ?

• We test if Advance Revelation Learning in isolation and combine with LDCV reduces SBDBDiff and SE?

• We test if the Decision Rule (JEEM 2009) further attenuates SBDBDiff and SE?


QUESTIONNAIRE

• SCENARIO

• Brief description of the current energy situation of Chile.

• Presentation and description of the hydropower projects in Chilean Patagonia (Patagonia, location of projects and impacts).

• Presentation and description of the renewable energy sources and its impacts .

• First Valuation task

• Description of the fossil fuel sources and its impacts.

• Presentation and description of the renewable energy sources and its impacts .

• Second Valuation task


Advance Revelation on Valuation Sequence

• In producing the 15% extra electricity required in Chile we are looking at how much more you would be willing to pay for this renewables alternative over the two other types of energy. In what follows you will be asked how you would vote if a referendum was held to choose between renewable energy and each of the other alternatives.


Advance Revelation on DB Institution

• Because the exact cost of the projects is not known today, we will ask you to vote on 2 different costs for each project. These costs represent the range into which the actual cost should fall.

• In what follows, you will vote for or against each alternative. You are asked how you would vote if the good could be provided at one of the two cost. This is followed directly by a second vote on how you would vote if the good could be provided at the second of the two costs.


Decision Rule

• Now imagine that the cost to you was $________ (Higher/Lower price) and the outcome of this second vote replaces that of the first vote, so that if a majority vote “Yes” in favour of the proposal the renewable energy projects are developed and if a majority vote “No” the Patagonian dams project will go ahead. We will not ask you to vote again at another cost on this proposal.

Would you vote Yes or No?


Results – Estimations First Valuation

RE instead of HYDROPOWER – HE (1st Valuation)

CONTROL AR AR + DRSB DB SB DB SB DB

Constant2.37

(7.39)2.35

(11.94)2.52

(8.00)2.36

(11.15)2.47

(8.30)2.34

(11.54)

Bid-0.50

(-3.33)-0.61

(-12.12)-0.67

(-4.49)-0.70

(-12.44)-0.72

(-5.16)-0.70

(-13.08)WTP 4776.54 3878.09 3787.32 3343.65 3425.03 3349.73

SE-wtp 901.99 191.04 474.09 161.44 350.79 160.77# Obs 340 340 323 323 340 340


Results – Estimations Second Valuation

RE instead of THERMOELECTRIC – TE (2nd Valuation)CONTROL AR AR + DR

SB DB SB DB SB DB

Constant2.16

(8.48)2.31

(12.37)1.92

(7.69)1.79

(9.84)1.88

(7.71)1.96

(10.63)

Bid-0.42

(-6.33)-0.49

(-14.97)-0.50

(-7.46)-0.49

(-15.31)-0.43

(-6.83)-0.45

(-15.06)WTP 5121.78 4674.47 3849.77 3631.62 4382.92 4359.09

SE-wtp 413.59 217.31 264.62 226.79 318.32 239.77# Obs 340 340 323 323 340 340


Results – SBDBDiff

HE (1st Valuation) TE (2nd Valuation)TREATMENT SB DB DIF SB DB DIF

Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83




Control4776.54(901.53)

3878.09(191.04)

898.455121.78(413.59)

4674.47(217.31)

447.31

AR3787.32(474.09)

3343.64(161.44)

443.683849.77(264.62)

3631.62(226.79)

218.15

AR+DR3425.03(350.79)

3349.73(160.77)

75.34382.92(318.32)

4359.09(239.77)

23.83


HE (1st Valuation) TE (2nd Valuation) SB DB DIF SB DB DIF

Control

His togram for Variable H_ SBWTP2

Fre

qu

ency

H_SBWTP2

******** ******** ******** ******** ******** ******** ******** ********

His togram for Variable T_ SBWTP2

Fre

qu

ency

T_SBWTP2

4022.472 4679.235 5335.999 5992.762 6649.525 7306.289 7963.052 8619.815

AR


Fre

qu

ency

H_SBWTP2

2602.817 3575.537 4548.258 5520.979 6493.700 7466.421 8439.141 9411.862


Fre

qu

ency

T_SBWTP2

2888.229 3204.015 3519.800 3835.586 4151.371 4467.157 4782.942 5098.728

AR+DR


Fre

qu

ency

H_SBWTP2

2596.429 3874.165 5151.900 6429.635 7707.370 8985.105 ******** ********


Fre

qu

ency

T_SBWTP2

3411.640 3852.988 4294.335 4735.682 5177.030 5618.377 6059.724 6501.072


Conclusions

• JEEM 2008 and 2009 looks only at significant SBDBDiff .

• This study also considers effect of AR, DR and LDCV on SE like the American literature.

• As in JEEM 2008, the SE on first SB valuation is several magnitude greater than other SE.

• AR appears to be almost same reduction in SBDBDIFF and SE as a repeated valuation in LDCV.

• Adding DR to AR greatly reduces the SBDBDIFF in the first valuation but even more in the second valuation and it takes out the strategically behavior.


Thanks for your attention

Questions

Contact Details: Claudia Aravena

[email protected]


Results - Responses

Hydropower (1st Valuation) Thermoelectric (2nd Valuation)

TREATMENT YY YN NY NN YY YN NY NN

Control(340

responses)

200(58.82%)

77(22.65%)

27(7.94%)

36(10.59%)

157(46.18%)

80(23.53%)

57(16.76%)

46(13.53%)

AR(323

responses)

182(56.35%)

76(23.53%)

33(10.22%)

32(9.91%)

120(37.15%)

66(20.43%)

60(18.58%)

77(23.84%)

AR+DR(340

responses)

196(57.65%)

67(19.71%)

38(11.12%)

36(10.59%)

147(43.24%)

62(18.24%)

69(20.29%)

62(18.24%)

Documents

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent