willingness to pay

The disparity between one’s willingness to accept and their willingness to pay has been a hot topic in the field of experimental economics for quite some time now. However, economists cannot agree what causes this disparity. It was not until 1963 when WTA-WPT became focused on the contingent valuation method, which shows that the value of any good can be expressed in monetary terms (Sayman & Onculer, 2011). As a result, the WTA-WTP gap was first noted in 1964 by Peter Louis Henderson. Now experts are wondering whether the gap is due to the endowment effect, emotions, risk attitudes, familiarity with the good, personality or morality. It seems it is a combination of all these factors. Not one behavior, aspect, or characteristic results in this gap to form. Perhaps, instead of focusing on where the gap comes from now, more emphasis should be placed on which aspect more heavily influences the gap given the type of good used and the group of subjects used. Once we figure out what the gap is from, we can change the way we look at market goods and more importantly how consumers make decisions.

The impact of extrinsic and intrinsic information on consumer decisions and evaluati ons has been analyzed in several studies in different disciplines such as quantitative marketing, economics, experimental psychology and sensory analysis. Many of these studies explicitly examine the effects of intrinsic and extrinsic information on food and beverages. Today's consumers are increasingly aware of, and demand, food safety, quality and authenticity, and show greater willingness to pay (WTP) for products that have these characteristics. Among the various communication strategies and signals in this sphere, labelling plays a key role. In particular, labels relating to certification of geographic origin are increasingly taken into consideration such as P.D.O. (Protected Designation of Origin), P.G.I. (Protected Geographical Indication) and T.S.G. (Traditional Speciality Guaranteed). Serving as a guarantee of food safety, quality and environmental aspects, certification of geographic origin provides consumers with positive utility.

Hill et al. (2011) examined which farmers would be early entrants into weather index insurance markets in Ethiopia, were such markets to develop on a large scale. They did this by examining the determinants of willingness to pay for weather insurance among 1,400 Ethiopian households that have been tracked for 15 years as part of the Ethiopia Rural Household Survey. This provides both historical and current information with which to assess the determinants of demand. They find that educated, rich, and proactive individuals were more likely to purchase insurance. Risk aversion was associated with low insurance take-up, suggesting that models of technology adoption can inform the purchase and spread of weather index insurance. They also assess how willingness to pay varied as two key characteristics of the contract were varied and find that basis risk reduced demand for insurance, particularly when the price of the contract was high, and that provision of insurance through groups was preferred by women and individuals with lower levels of education.

There is a range of reasons why households may value a recycling service and so enjoy a non- market benefit. These include avoidance of perceived problems associated with the landfill disposal options, concern for the conservation of virgin resources and associated environments, ethical considerations and social obligations (Lake et al 1996). Aadland and Caplan (1999) assume that a loosely defined notion of altruism motivates household demand for kerbside recycling reflecting a concern for the environment and the existence, option and amenity values that the household ascribes to the act of recycling. Whatever the motivations, studies that have aimed to estimate community values for the non-market benefits of kerbside recycling have not attempted to disaggregate the diverse value components. They have however recognised that any willingness to pay (WTP) for the non-market benefits of kerbside recycling represents an amalgam of these motivations (Lake et al 1996).

A full appreciation of the potential and consequences of instituting user fees for education requires broadening the scope of the analysis—to include issues such as how much a household will be willing to pay for education of children if additional educational services like a new school in the neighbourhood are made available to it. By estimating parents’ willingness to pay for their children’s education for different income groups, we can find out the maximum amount of tuition that can be charged without reducing income group-specific enrolment rates. This is a worthwhile measure for devising a scheme of user charges for education as well as for appraising the feasibility of involving private investors and NGOs in this sector; and it is based on the principal of utility maximisation.

states that do not sale wines in grocery stores. Recent statistics indicate that Tennessean’s on average consume less wine per-capita than the U.S. average person (National Institute on Alcohol Abuse and Alcoholism 2015). Thus, this new law could expand wine consumption in Tennessee; potentially expanding wine sales for state-produced wines. However, no research exists on how Tennessee consumers’ preferences for Tennessee produced wines compares to non-Tennessee produced wines. Ascertaining Tennessee consumers’ willingness to pay (WTP) for a Tennessee produced and labeled wine is an important component to understanding the potential market for these wines among the state’s consumers. Given the relatively high level of capital investment and high costs of grape and wine production, the ability of Tennessee wine producers to compete with producers from other lower cost production areas may rely on obtaining price premiums from consumers. Information regarding Tennessee consumers’ WTP for Tennessee wines is useful for Tennessee wineries and grape growers to understand demand for their producers and consider expansion of vineyards and increasing their ‘venting and bottling’.

Contingent Valuation is a method of estimating the value that a person places on a good. The approach asks people directly and report their willingness to pay (WTP) to obtain a specified good, or willingness to accept (WTA) to give up a good, rather than inferring them from observed behaviors in regular market places. Contingent valuation has been successfully used for commodities that are not exchanged in regular markets, or when it is difficult to observe market transactions under desired conditions. (Rahmation, 2005)

Long et al. (2013) pointed out that households’ total value of assets, size of field and ability to borrow had positive correlations with farmers’ willingness to buy insurance. Results from the Ordinary Least Square (OLS) estimation in the Heckman procedure showed a negative correlation between households’ expenditure per capita as well as coping strategies and their willingness to participate and pay for insurance. Gulseven (2014) performed a twofold empirical analysis, first using the logit model to determine farmers’ demand for insurance and a contingent valuation open ended and take it or leave it type questions to derive farmers’ WTP amounts. Education and farm income were shown to have positive and significant effects on farmers WTP but household size and union membership were not found to be statistically significant. The authors found strong evidence that, demand is downward sloping with farmers’ willingness to pay declining sharply with lower coverage levels. Falola et al. (2013) examined the willingness of cocoa farmers to take agricultural insurance in Nigeria. Out of the sampled farmers, 39% of the sample with knowledge of the product were willing to participate. Age, farm income, education and access to extension services were revealed to influence the willingness to take agricultural insurance according to the explanatory model developed using the probit model.

Health and food safety consciousness is significantly associated with the willingness to pay for organic vegetables. Therefore, promotional activities focussed on organic products by government agencies and marketers should emphasise the health and food safety attributes of these products. For example, the promotional campaign should emphasise that organic products are safe and produced without synthetic chemical inputs, artificial additives or growth stimulants. Avoiding these substances is important to most consumers who are concerned about health and food scandals. In addition, improving the perception of the quality and health benefits of organic products (i.e. better taste, more nutrition, less chemical residue) significantly increased consumers’ WTP for organic products. The empirical results confirmed that food quality attributes (e.g. freshness, appearance, and nutrition) and the pesticides-free attribute were the most important factors influencing their purchase of food products. Marketing strategies should thus try to increase consumer familiarity with organic products and reinforce the perception that these products are likely to rate higher on the sensory (i.e. taste), nutrition and food safety attributes when compared with conventional products. Such strategies would include providing product samples, promoting trials of the products and communicating consumers’ evaluations of the quality of the products. In addition, producers have to improve the quality and safety of organic products to meet consumers’ expectations of quality standards.

Abstract The paper investigates the spatial heterogeneity of public’s preferences for the implementation of a new country-wide forest management and protection program in Poland. Spatial econometric methods and high resolution geographical information system data related to forest characteristics are used to explain the variation in individual-specific will- ingness to pay (WTP) values, derived from a discrete choice experiment study. We find that respondents’ WTP is higher the closer they live to their nearest forest, and the scarcer forests are in the area where they live. Interestingly, the higher the ecological value of forests in respondents’ area, the more people prefer extending areas of national forest protection. We also investigate spatial patterns in individual-specific WTP scores and in latent class mem- bership probabilities, finding that preferences are indeed spatially clustered. We argue that this clustering should be taken into account in forest management and policy-making. Keywords Discrete choice experiment · Contingent valuation · Willingness to pay · Spatial heterogeneity of preferences · Forest management · Passive protection · Litter · Tourist infrastructure · Mixed logit · Kriging · Spatial-lag

The concern about vegetable safety, together with a booming population and the rise of the middle class has made Vietnam become a potential market for organic vegetables. This paper investigates the determinants of willingness to pay (WTP) for organic vegetables in Hanoi, Vietnam with a particular attention to regional differences and the effect of risk perception. Using Contingent Valuation Method to analyze the data from a sample of 498 consumers in Hanoi, the paper shows that the perceived use values of organic vegetables, trust in organic labels, and disposable family income increased WTP for organic vegetables in both urban and rural regions. Though risk perception of conventional vegetables was high in both regions, such heightened risk perception just translated into the WTP in the rural region. In addition, the percentage of home-grown vegetables in the total vegetable consumption of the family influenced the WTP in the rural region only. Moreover, being an organic purchaser was positively related to the WTP in the urban region but not in the rural region. The paper also discusses three policy implications for Vietnam to boost the demand for organic food.

The neighborhood quality measures are taken from averages of census block groups and the values act as representative for houses within that group. While the housing price and characteristic measures are taken from each house specifically, we average these at the census block group level as well to facilitate the spatial nature of our analysis (Brasington and Hite, 2005). The use of a hedonic model to measure willingness to pay for an amenity is complicated by the fact that housing prices are interrelated. An increase in the price of one house will increase the neighboring house values (Anselin, 1988). An inclusion of the average price of the nearest neighbors’ house is possible in the Ordinary Least Squares framework, but likely biased (Lesage and Pace, 1988). Although we run a simple OLS estimation, a spatial model which simultaneously estimates the house prices with maximum likelihood estimation is more appropriate.

depletion are real problems to be addressed in the context of the welfare of society. In this context, renewable energy sources (RES) are essential to reduce polluting emissions. As a result, researchers have increased their interest in the economic implications of the development of renewable energy used in electricity production. One important feature of the RES is their high supp ly generation cost and this characteristic has two important consequences with respect to public opinion. First, this high cost prevents the widespread uptake of renewable energy systems in spite of their environmental soundness. Consequently, if there is not sufficient consumer willingness to pay WTP, public funding is needed to support RES development. Second, if consumers take into account the environmental issues and consider that pro moting RES will mitigate environmental damage, they are likely to attach a positive value to these RES. As consumers think positively of renewable energy technologies, this attitude may influence their WTP by augmenting the premiums they are willing to pay for such new technology; as a consequence, the need for public funding might be reduced over time. In accordance with this scenario, the main objective of this study is to use an SPC method F

Abstract How willingness to pay for environmental quality changes as incomes rise is a central question in several areas of environmental economics. This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1–0.2 for low-income respondents and 0.6–0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant but is always less than one. This has implications for how benefits transfer exercises, and for theoretical explanations of the environmental Kuznets curve.

Contingent valuation is a method for assigning monetary values to non-market goods, such as health-care interventions, for use as an outcome measure within cost – benefit analysis (CBA). Willingness-to-pay (WTP) is the most commonly used contingent valuation approach and pro- vides an overall measure of strength of preference expressed in monetary terms. Using this approach, individuals are asked to consider hypothetical scenarios that describe both the process and outcome of the health-care interven- tion and asked to state maximum WTP for the health care good being valued. Sample average WTP values are typically used as an indication of strength of preference and can be directly compared to assess the value of alternative health-care interventions. In a similar way to how EQ-5D is used to inform the outcome mea- sure for cost–utility analysis (CUA), WTP can also be used to inform the outcome for a CBA. Used in this way, it becomes a generic measure of value for treatment or services and is thus weighed against cost to measure overall cost- effectiveness. Depending on the ratio between the incremental difference in costs and benefits (WTP) of alternative treatment options, judge- ments can then be made by decision makers on whether to recommend the treatment/service based on this ratio. WTP encapsulates both health and non-health aspects of well-being, the advantages of such an approach are ever more recognized, particularly because the National Institute for Health and Care Excellence are now also commissioning across public health and social care. 1 Despite this, there are key limi- tations to the WTP approach including the difficulty with contemplating the hypothetical survey scenario, and the lack of well-defined preferences when individuals are unfamiliar with the goods they are asked to value. The literature also refers to evidence on strategic bias and questions about the validity of the approach. 2

The payment choices completed in the survey were completed again during the telephone interviews. The telephone was not an ideal format for running through this exercise. It was evident that the interviewees had experienced conceptual problems with this approach. Three respondents suggested their own payment ceiling half way through the administration of the payment card. They did not feel that the taxation levels presented to them matched with their willingness or ability to pay and they wanted to state a personal tax level. Does the use of traditional payment cards confuse participants? Would people give a more accurate reflection of their willingness to pay if it was routine for a personal payment ceiling to be recorded?

From a statistical point of view, the results of the ordinal logit model to analyze the main factors influencing consumer’s WTPs perform well in terms of theoretical validity. Our priori expectations on the effects of information and consumer’s perception on their WTP are conformed by the statistical analysis, with the exception of willingness-to-pay. The factors significantly affect value of WTPs are age, perception of green foods, television as the main access to information. Surprisingly, a significant inflexion is found in the relationship between age and wtp, which is needed further discussion in the future research.

In any case, it seems that the transition to any alternative mode of energy generation could be somewhat costly in the near term, even though – according to the alluded independent studies- it promises significant cost advantages in the future and avoids what some consider to be the destruction of some valuable natural capital. In order to legitimately compare the costs of the five-dams project with alternatives, the eventual cost of the damage to the environment of the project must be taken into account. This is precisely what this survey is directed to do. Specifically, this survey will enable us to estimate the value of preserving Patagonia’s natural environment, by assessing the willingness to pay of energy consumers. The true cost of the five- dams project can then be ascertained as the monetary cost of the project plus the cost of the value of preserving Patagonia’s natural environment. By answering the questions below, you will enable us to determine how much people are willing to pay to avoid the destruction of Patagonia, or put differently, the value of the existence of this natural environment to people across the globe. Whatever this cost is, the result of this survey will be extremely useful for researchers and policymakers. We are grateful for your willingness to participate in the survey.

The increased availability of such expensive tests raises the question of who will pay for them. For policy makers it is not always clear whether the benefits of the tests justify the cost and therefore it may be argued that patients could be required to pay for or contribute towards the tests themselves. One way to evaluate the monetary value of both the health and/or non- health benefits of genetic testing is to conduct a contingent valuation (CV). The CV method consists of asking individuals directly, within a hypothetical scenario, the maximum amount that they would be willing to pay for a specific intervention or information. Willingness-to- pay (WTP) surveys have been increasingly used to evaluate health care programmes in health and health care 1,2 , including applications to predictive and diagnostic genetic testing 3,4 . Recent studies in WTP have increasingly used discrete choice experiments (DCE) to estimate WTP 5 . However, we did not consider designing a DCE for the present study as

The key part of the questionnaire in terms of valuation of overall household benefits is the stated preference component. Our approach is a hybrid of stated choice experiment (CE) (Louviere et al., 2000) and dichotomous-choice contingent valuation (DCCV) (Carson and Mitchell, 1989) methods. Both methods use ‘choice tasks’ in which respondents are presented with one or more scenarios with specified cost and asked to state which scenario he/she prefers. Our survey is similar to a DCCV survey in that each choice task presents two scenarios – the current service scenario and an undergrounding scenario – where the price of the undergrounding scenario varies over choice tasks. The survey also has characteristics of a CE survey. The scenarios are described by multiple service attributes and the levels assigned to the attributes vary over choice tasks providing the variation necessary for estimation. Respondents’ choices reveal their willingness to pay (WTP) for each service attribute and for undergrounding overall. Some 1,163 households responded to a single choice task (the SB format) and 292 households responded to a sequence of four choice tasks (the repeated binary, RB, format). 4 Data from questions subsequent to the first in the RB format were excluded from the analysis in this paper due to concerns over the response bias caused by information observed in previous choice tasks. For more detail the reader is referred to McNair et al. (2010). A further 82 choice observations were excluded from our models where respondents took less than five minutes to complete the survey. It was judged that these responses were