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Directional heterogeneity in WTP models for environmental valuation

Directional heterogeneity in WTP models for environmental valuation
Directional heterogeneity in WTP models for environmental valuation
Many studies in the stated preference literature on environmental valuation do not include the effects of substitutes and distance in willingness-to-pay (WTP) models, in spite of the relevance of these effects in aggregation and benefit transfer. Heterogeneity in the availability of substitutes over space may cause multidirectional distance effects in WTP. As a result, disregarding this spatial heterogeneity may lead to biased estimators of the distance effect and associated WTP values (Cameron, 2006). In this paper, we demonstrate that distance decay is subject to significant directional effects which tend to be related to differences in the availability of substitutes across the study area. We apply a straightforward methodology to account for such spatial heterogeneity in choice experiments and assess the effect on WTP for improvements in ecosystem services in a lake district. We model distance-decay effects, whilst controlling for heterogeneity between users and non-users and non-use related WTP reasons. The directional effects result in significantly different WTP estimates, different market sizes reflecting the population with positive WTP, and differences in total WTP up to 32%.

0921-8009
21-31
Schaafsma, Marije
937ac629-0fa2-4a11-bdf7-c3688405467d
Brouwer, Roy
e05861b5-5961-45cd-9de0-883067908c5e
Rose, John
d512ba89-163e-43ad-90f8-1e58aa295269
Schaafsma, Marije
937ac629-0fa2-4a11-bdf7-c3688405467d
Brouwer, Roy
e05861b5-5961-45cd-9de0-883067908c5e
Rose, John
d512ba89-163e-43ad-90f8-1e58aa295269

Schaafsma, Marije, Brouwer, Roy and Rose, John (2012) Directional heterogeneity in WTP models for environmental valuation. Ecological Economics, 79, 21-31. (doi:10.1016/j.ecolecon.2012.04.013).

Record type: Article

Abstract

Many studies in the stated preference literature on environmental valuation do not include the effects of substitutes and distance in willingness-to-pay (WTP) models, in spite of the relevance of these effects in aggregation and benefit transfer. Heterogeneity in the availability of substitutes over space may cause multidirectional distance effects in WTP. As a result, disregarding this spatial heterogeneity may lead to biased estimators of the distance effect and associated WTP values (Cameron, 2006). In this paper, we demonstrate that distance decay is subject to significant directional effects which tend to be related to differences in the availability of substitutes across the study area. We apply a straightforward methodology to account for such spatial heterogeneity in choice experiments and assess the effect on WTP for improvements in ecosystem services in a lake district. We model distance-decay effects, whilst controlling for heterogeneity between users and non-users and non-use related WTP reasons. The directional effects result in significantly different WTP estimates, different market sizes reflecting the population with positive WTP, and differences in total WTP up to 32%.

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More information

Published date: July 2012
Organisations: Faculty of Natural and Environmental Sciences, Geography & Environment

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Local EPrints ID: 368363
URI: http://eprints.soton.ac.uk/id/eprint/368363
ISSN: 0921-8009
PURE UUID: 95e0a516-3825-46a9-893f-b46dd41f0f22
ORCID for Marije Schaafsma: ORCID iD orcid.org/0000-0003-0878-069X

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Date deposited: 12 Sep 2014 13:52
Last modified: 15 Mar 2024 03:51

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Contributors

Author: Roy Brouwer
Author: John Rose

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