Second Best Beach (B) Demand Curve
69TABLE7.2 EXAMPLE OF PAIRWISE CHOICE FOR THE HYDROLOGICAL ATTRIBUTE MODEL
Plan Component Plan A Plan B
60% of the time, Lake levels and timing are similar to historic, predrainage conditions
50% of areas have water levels and timing similar to historic, predrainage conditions
50% of the area has water levels and timing similar to historic, predrainage conditions
No change
Outdoor use limited to 2 days per week; indoor use reduced 25%
No change in farmland acreage Lake Okeechobee, Water Levels
and Timing.
Everglades Water Conservation Areas, Water Levels and Timing.
Everglades National Park and Florida Bay, Water Levels and Timing.
Annual Cost Per Household.
Restrictions on Household Outdoor and Indoor Water Use.
Farmland (acres) in the
Everglades Agricultural Area and Western Portions of Palm Beach, Broward and Dade Counties.
60% of the time, Lake levels and timing are similar to historic, predrainage conditions
50% of areas have water levels and timing similar to historic, predrainage conditions
90% of the area has water levels and timing similar to historic, predrainage conditions
Increased $25 per year
Outdoor use limited to 3 days per week; indoor use reduced 10%
Reduce farmland acreage by 100,000 acres or 15% of farmed area
6 Marginal willingness to pay for each attribute was calculated with the formula:
((βi(A0) - (βi(A1 )))/ βCwhere βiis the estimated coefficient for an attribute, A0and A1represent base and restored attribute levels, respectively, and βCrepresents the estimated coefficient for the annual cost per
household attribute. Due to the nature of the utility function specification, the marginal values are con- stant (linear) for each attribute with the exception of the water restriction attribute that was decomposed into two separate effects. Because the cost per household attribute is used to transform attribute levels into monetary units, there is no marginal effect associated with the cost attribute. Due to the nature of the household cost attribute (see Table 7.1), these annual willingness to pay values apply over a ten-year period.
each attribute (see Chapter 4). For example, the average respondent would be willing to pay $9.68 annually to change water management so that water levels and timing in Lake Okeechobee were similar to historic, pre- drainage conditions 75 per- cent of the time instead of the current baseline of 60 percent. (If water levels and timing in Lake Okeechobee were simi- lar to historic, predrainage conditions 90 percent of the time, the marginal willingness to pay for this change would be $19.36 per household per year.) Similarly, respondents would be willing to pay $17.63 to change water management so that water levels and timing in the Water Conservation Areas were similar to historic, predrainage conditions 75 percent of the time instead of the current baseline of 50 percent. The relative difference in willingness to pay for roughly similar changes in the two areas reflects the higher weight given to the Water Conservation Area attribute.
On the other hand, Figure 7.3 also shows that respondents would be willing to pay $37.10 to avoid changes in the water management system that would increase water use restrictions during dry years from allowable outdoor uses three days per week with 10 percent reductions in indoor water use to allowable outdoor uses only one day per week with 40 percent reductions in indoor water use. The magnitude of this value reflects the strong aversion respondents expressed to this type of water use restriction. But, the willingness to pay of $1.80 for a smaller restriction on water use indicates that the marginal loss from this type of restriction would be relatively low.
The marginal values presented in Figure 7.3 show the relative changes in economic value that could result from incremental changes in each attribute. These marginal effects, however, do not constitute measures of economic value for a restoration plan because several attributes would change at one time under any actual restoration plan. Therefore it is necessary to consider how several attribute levels would change under various restoration plan scenarios.
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Figure 7.3. Relative marginal values for attributes in the multiattribute model.
Restoration Plan Rankings
A feature of the multiattribute utility approach is that attribute weights derived from the pairwise choice process can be used to evaluate a range of alternative restora- tion plans with various configurations of the attributes.7To illustrate this application, a set of possible restoration plans was constructed using the attribute levels specified previously in Table 7.1. These plans were intended to reflect the range of alternatives that had been discussed for the Everglades/South Florida restoration plan but were not intended to represent any specific plan.
Table 7.3 presents complete descriptions of the alternative plans along with the attribute levels included under each plan. The plans range from full restoration with no costs to partial restoration plans that impose various levels of costs. Included in Table 7.3 is the percentage of respondents who would vote in favor of each plan based on their MAU score for that alternative8and the overall ranking for each of the plans. Table 7.3 also presents estimates of the net willingness to pay for each plan based on the marginal willingness to pay values presented previously in Figure 7.3.
The results in Table 7.3 show that respondents strongly favor full ecosystem restora- tion, but only when Floridians bear no direct costs through higher taxes, water use restrictions or reductions in farmland.9The net willingness to pay for this plan is $58.78 per household per year. Over the ten-year period used for the annual cost attribute (see Table 7.1), this would amount to an aggregate willingness to pay of $588 per household.
When full restoration is matched with low costs ($25 per household per year), reductions in farmland acreage (loss of 100,000 acres) and minor restrictions on water use (outdoor uses restricted to 2 days, 25 percent indoor use reductions), a majority (54.3 percent) would favor such a plan. However, the relative ranking of this plan is only third of the five considered in this analysis. The net willingness to pay for this plan is $15.59 per household per year. If full restoration is matched with high cost and major restrictions on water use, less than a third (31.1 percent) would favor this plan and it is the lowest ranked alternative.
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7These plans may differ from the alternatives considered in the pairwise choice process since the 27
attribute combinations used in the interviews were selected to meet specific experimental design criteria.
8It is assumed that a respondent would vote in favor of an alternative if the utility score for that alterna-
tive was greater than the utility score for a baseline alternative (i.e., all attributes at their lowest, baseline level). Calculations of utility scores can be made using either aggregate or individual-specific weights (Swallow et al. 1994).
9From a legal standpoint, a full restoration with no cost plan is not possible since the Water Resources Act
of 1996 requires a 50/50 federal and state cost sharing agreement for any Everglades/South Florida ecosystem restoration plan (Vogel 1998).
Table 7.3 also indicates that various partial restoration plans would be favored by a majority of respondents, though the results are very sensitive to the costs imposed by the plan. A partial restoration plan that focused on the Water Conservation Areas and Everglades National Park imposed no direct costs on households but minor reductions in farmland (100,000 acres) and minor restrictions on water use, would be favored by a majority (54.3 percent). Net willingness to pay for this plan would be $6.42 per house- hold per year.
A comparable partial restoration plan (that added partial restoration of Lake Okeechobee) in which direct costs increased to $25 per household per year would not
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