Do Respondents' Perceptions of the Status Quo Matter in Non-Market Valuation with Choice Experiments? An Application to New Zealand Freshwater Streams

Many issues relating to the sustainability of environmental resource use are informed by environmental valuation studies with stated preference surveys. Within these, researchers often provide descriptions of status quo conditions which may differ from those perceived by respondents. Ignoring this difference in utility baselines may affect the magnitude of estimated utility changes and hence bias benefit estimates of proposed environmental policies. We investigate this issue using data from a choice experiment on a community's willingness to pay for water quality improvements in streams. More than 60% of respondents perceived streams' water quality at the status quo to be better than the description we provided in our scenario. Results show that respondents who could provide details of their perception of the status quo displayed stronger preferences for water quality improvements—and hence higher marginal willingness to pay—than their counterparts. However, respondents who referred to their own status quo description displayed a higher inclination to prefer the status quo, while other respondents tended to prefer the proposed improvements. We argue this might be linked to the amount of knowledge each group displayed about the status quo: a kind of reluctance to leave what one believes he/she knows well.

[1]  E. Pouta,et al.  Non-market benefits of forest conservation in southern Finland , 2003 .

[2]  Wiktor L. Adamowicz,et al.  Valuation of cancer and microbial disease risk reductions in municipal drinking water: An analysis of risk context using multiple valuation methods , 2011 .

[3]  J. Bennett,et al.  Using Choice Experiments to Value Catchment and Estuary Health in Tasmania with Individual Preference Heterogeneity , 2011 .

[4]  Juan de Dios Ortúzar,et al.  Modelling Transport, 2nd Edition , 1990 .

[5]  I. Bateman,et al.  Scenario Realism and Welfare Estimates in Choice Experiments-Evidence from a study on implementation of the European Water Framework Directive in Denmark , 2009 .

[6]  K. Train,et al.  Mixed Logit with Repeated Choices: Households' Choices of Appliance Efficiency Level , 1998, Review of Economics and Statistics.

[7]  R. Scarpa,et al.  Deriving and Testing Efficient Estimates of WTP Distributions in Destination Choice Models , 2009 .

[8]  Wuyang Hu,et al.  Economic Values of Dolphin Excursions in Hawaii: A Stated Choice Analysis , 2009, Marine Resource Economics.

[9]  Jeffrey Bennett,et al.  Valuing New South Wales Rivers for Use in Benefit Transfer , 2004 .

[10]  John M. Rose,et al.  Designing efficient stated choice experiments in the presence of reference alternatives , 2008 .

[11]  John M. Rose,et al.  Should Reference Alternatives in Pivot Design SC Surveys be Treated Differently? , 2009 .

[12]  K. Train.  Recreation Demand Models with Taste Differences Over People , 1998 .

[13]  Jordan J. Louviere,et al.  Design and Analysis of Simulated Consumer Choice or Allocation Experiments: An Approach Based on Aggregate Data , 1983 .

[14]  Jordan J. Louviere,et al.  A comparison of stated preference methods for environmental valuation , 1996 .

[15]  John M. Chambers,et al.  Graphical Methods for Data Analysis , 1983 .

[16]  William S. Breffle,et al.  Comparing Choice Question Formats for Evaluating Natural Resource Tradeoffs , 2002, Land Economics.

[17]  Stewart Jones,et al.  An Error Component Logit Analysis of Corporate Bankruptcy and Insolvency Risk in Australia , 2007 .

[18]  R. Sugden,et al.  Regret Theory: An alternative theory of rational choice under uncertainty Review of Economic Studies , 1982 .

[19]  William L. Moore,et al.  The no-choice option and dual response choice designs , 2006 .

[20]  John M. Rose,et al.  Design Efficiency for Non-Market Valuation with Choice Modelling: How to Measure it, What to Report and Why , 2008 .

[21]  David A. Hensher,et al.  The Mixed Logit Model: the State of Practice and Warnings for the Unwary , 2001 .

[22]  R. Dhar,et al.  The Effect of Forced Choice on Choice , 2003 .

[23]  Janet Mancini Billson,et al.  Focus Groups: A Practical Guide for Applied Research , 1989 .

[24]  Riccardo Scarpa,et al.  Performance of Error Component Models for Status-Quo Effects in Choice Experiments , 2005 .

[25]  Jürgen Meyerhoff,et al.  Status Quo Effect in Choice Experiments: Empirical Evidence on Attitudes and Choice Task Complexity , 2009, Land Economics.

[26]  K. Willis,et al.  Valuing externalities from water supply: Status quo, choice complexity and individual random effects in panel kernel logit analysis of choice experiments , 2007 .

[27]  K. Train,et al.  Forecasting new product penetration with flexible substitution patterns , 1998 .

[28]  Jeffrey Bennett,et al.  Using Choice Experiments to value River and Estuary Health in Tasmania with Individual Preference Heterogeneity , 2009 .

[29]  D. Marsh,et al.  Valuation of Water Quality Improvements in the Karapiro Catchment: A Choice Modelling Approach , 2009 .

[30]  Jordan J. Louviere,et al.  DESIGN AND ANALYSIS OF SIMULATED CHOICE OR ALLOCATION EXPERIMENTS IN TRAVEL CHOICE MODELING , 1982 .

[31]  Jordan J. Louviere,et al.  Perceptions versus Objective Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation , 1997 .

[32]  D. Marsh,et al.  Does respondent’s perceived knowledge of the status quo affect attribute attendance and WTP in choice experiments? Evidence from the Karapiro Catchment Freshwater streams , 2010 .

[33]  Eija Pouta,et al.  Using Choice Experiments to Value the Natura 2000 Nature Conservation Programs in Finland , 2004 .

[34]  John W. Tukey,et al.  Exploratory Data Analysis. , 1979 .

[35]  I. Bateman,et al.  A Test of the Theory of Reference-Dependent Preferences , 1997 .

[36]  Jordan J. Louviere,et al.  Choice Set Design , 2001 .

[37]  J. Herriges,et al.  Inducing Patterns of Correlation and Substitution in Repeated Logit Models of Recreation Demand , 2002 .

[38]  P. Boxall,et al.  Complexity in Choice Experiments: Choice of the Status Quo Alternative and Implications for Welfare Measurement , 2009 .

[39]  Peter P. Wakker,et al.  Utility in Case-Based Decision Theory , 2000, J. Econ. Theory.

[40]  M. Thiene,et al.  Using Flexible Taste Distributions to Value Collective Reputation for Environmentally Friendly Production Methods , 2008 .

[41]  Riccardo Scarpa,et al.  Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments , 2008 .

[42]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[43]  J. Louviere,et al.  Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation , 1998 .

[44]  R. Scarpa,et al.  Benefit Estimates for Landscape Improvements: Sequential Bayesian Design and Respondents’ Rationality in a Choice Experiment , 2005, Land Economics.

[45]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .

[46]  David A. Hensher,et al.  Development of Commuter and Non-Commuter Mode Choice Models for the Assessment of New Public Transport Infrastructure Projects: A Case Study , 2007 .

[47]  F. Johnson,et al.  Opt-out alternatives and anglers' stated preferences , 2000 .

[48]  K. Glenk.  Using local knowledge to model asymmetric preference formation in willingness to pay for environmental services. , 2011, Journal of environmental management.

[49]  Riccardo Scarpa,et al.  Designs with a priori information for nonmarket valuation with choice experiments: A Monte Carlo study , 2007 .

[50]  C. Starmer.  Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk , 2000 .

[51]  D. Kahneman,et al.  Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias , 1991 .

[52]  Gregory L. Poe,et al.  Implementing the Convolutions Approach: A Companion to "Measuring the Difference (X-Y) of Simulated Distributions: A Convolutions Approach" , 1994 .

[53]  S. Swaffield,et al.  Amenity values of spring fed streams and rivers in Canterbury, New Zealand: a methodological exploration. , 2007 .

[54]  Jordan J. Louviere,et al.  Introduction to Attribute-Based Stated Choice Methods , 1998 .

[55]  P. Boxall,et al.  Future Directions of Stated Choice Methods for Environment Valuation , 2001 .

[56]  William Samuelson,et al.  Status quo bias in decision making , 1988 .