Journal Article

Validity of Willingness to Pay Measures under Preference Uncertainty

Rehdanz, Katrin, Braun, Carola, Schmidt, Ulrich

2016

Overview

Recent studies in the marketing literature developed a new method for eliciting willingness to pay (WTP) with an open-ended elicitation format: the Range-WTP method. In contrast to the traditional approach of eliciting WTP as a single value (Point-WTP), Range-WTP explicitly allows for preference uncertainty in responses. The aim of this paper is to apply Range- WTP to the domain of contingent valuation and to test for its theoretical validity and robustness in comparison to the Point-WTP. Using data from two novel large-scale surveys on the perception of solar radiation management (SRM), a little-known technique for counteracting climate change, we compare the performance of both methods in the field. In addition to the theoretical validity (i.e. the degree to which WTP values are consistent with theoretical expectations), we analyse the test-retest reliability and stability of our results over time. Our evidence suggests that the Range-WTP method clearly outperforms the Point-WTP method.

• Publisher: Public Library of Science,Public Library of Science (PLoS)
• Subject: Alternative Energy / Analysis / Biology and Life Sciences / Chocolate / Choice Behavior / Climate Change / Climate Change - economics / Contingent valuation / Cost-Benefit Analysis - economics / Earth Sciences / Economic models / Emotions / Engineering and Technology / Geoengineering / Germany / Global temperature changes / Humans / Marketing - economics / Medicine and Health Sciences / Payment / Reliability analysis / Research and Analysis Methods / Research Validity / Social Sciences / Solar Energy - economics / Solar radiation / Stability analysis / Surveys / Uncertainty / Willingness to pay / Wine