Internal Consistency in Double Bounded
Dichotomous Choice Contingent Valuation:
Use of Explicit Decision Rules and Sequential
and Advance Revelation Learning Design
(LDCV)
Claudia D. Aravena Novielli*a
Fredrik Carlsson b
W. George Hutchinson a
Dave Matthews a
a. Queen’s University Belfast
b. University of Gothenburg
Camp Resources XVII
Wilmington, June 24-25, 2010
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Introduction
Double Bounded Dichotomous Choice Contingent
Valuation
Anomalies
Differences between SB – DB (SBDBDiff)
Advance Revelation
Explicit Decision Rules
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Introduction
• Elicitation Format: Double Bounded Referendum
YES
YY
NO
YN
YES
NY
NO
NN
WTP
YES
1000?
WTP
500?
NO
WTP
250?
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Background
• Hannemann et al.1991 popularized DBDC while recognize the
DBDCDiff (MWTPSB > MWTPDB).
• Carson et al 2009 and Deshazo 2002 outline 7 explanations
for the SBDBDiff.
• Carson et al. 2009 describes the Difference as stereotypical
facts
• JEEM 2008 following Matthews et al. 2003 develops a simple
test for the significance of the SBDBDiff using resampling
methods.
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Introduction
• JEEM 2008  SBDBDiff reduces in repeated valuations by
Institutional Learning (LDCV).
• JEEM 2004  Introduce Advance Revelation. We use this to
effect Institutional Learning and find SBDBDiff is reduced
(ARLD).
• We combine Advance Revelation with repeated valuations
affecting more reduction in SBDBDiff
• JEEM 2009  in a lab experiment used a Decision Rule to
clarify outcomes of the second vote and removed SBDBDiff .
• In a field CVM we combine Advance Revelation with the
Decision Rule and test removal SBDBDiff .
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Design of the Study
• Contingent Valuation Method
• Frame: WTP for Renewable Energy sources
• Sequential valuations with 2 baselines:
– Renewable Energies instead of Hydropower
– Renewable Energies instead of Fossil Fuels.
• 3 Split Samples Treatments: (1100 interviews)
– Sample 1: Control treatment
– Sample 2: Advance Revelation (AR) treatment
– Sample 3: Advance Revelation + Decision Rule treatment (DR)
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Design of the Study and Hypotheses
RE instead of HE (1st Valuation)
TREATMENT
SB
DB
SBDB Diff
RE instead of TE (2nd Valuation)
SB
DB
SBDB Diff
Control
AR
AR+DR
SBDB Diff
>
Gibson Institute for Land, Food and Environment
>
Institute for a Sustainable World
Design of the Study and Hypotheses
RE instead of HE (1st Valuation)
TREATMENT
SB
DB
SBDB Diff
RE instead of TE (2nd Valuation)
SB
DB
SBDB Diff
Control
AR
AR+DR
SBDB Diff
>
Gibson Institute for Land, Food and Environment
>
Institute for a Sustainable World
Objective
• Re test LDCV (reduction in the SBDBDiff ) and SE ?
• We test if Advance Revelation Learning in isolation
and combine with LDCV reduces SBDBDiff and SE?
• We test if the Decision Rule (JEEM 2009) further
attenuates SBDBDiff and SE?
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
QUESTIONNAIRE
• SCENARIO
• Brief description of the current energy situation of Chile.
• Presentation and description of the hydropower projects in Chilean
Patagonia (Patagonia, location of projects and impacts).
• Presentation and description of the renewable energy sources and its
impacts .
• First Valuation task
• Description of the fossil fuel sources and its impacts.
• Presentation and description of the renewable energy sources and its
impacts .
• Second Valuation task
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Advance Revelation on Valuation Sequence
• In producing the 15% extra electricity required in Chile we
are looking at how much more you would be willing to pay
for this renewables alternative over the two other types of
energy. In what follows you will be asked how you would vote
if a referendum was held to choose between renewable energy
and each of the other alternatives.
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Advance Revelation on DB Institution
• Because the exact cost of the projects is not known today, we
will ask you to vote on 2 different costs for each project.
These costs represent the range into which the actual cost
should fall.
• In what follows, you will vote for or against each alternative.
You are asked how you would vote if the good could be
provided at one of the two cost. This is followed directly by a
second vote on how you would vote if the good could be
provided at the second of the two costs.
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Decision Rule
• Now imagine that the cost to you was $________
(Higher/Lower price) and the outcome of this second vote
replaces that of the first vote, so that if a majority vote
“Yes” in favour of the proposal the renewable energy
projects are developed and if a majority vote “No” the
Patagonian dams project will go ahead. We will not ask
you to vote again at another cost on this proposal.
Would you vote Yes or No?
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Results – Estimations First Valuation
RE instead of HYDROPOWER – HE (1st Valuation)
Constant
Bid
WTP
SE-wtp
# Obs
CONTROL
SB
DB
2.37
2.35
(7.39)
(11.94)
-0.50
(-3.33)
4776.54
901.99
340
-0.61
(-12.12)
3878.09
191.04
340
AR
AR + DR
SB
2.52
(8.00)
DB
2.36
(11.15)
SB
2.47
(8.30)
DB
2.34
(11.54)
-0.67
(-4.49)
3787.32
474.09
323
-0.70
(-12.44)
3343.65
161.44
323
-0.72
(-5.16)
3425.03
350.79
340
-0.70
(-13.08)
3349.73
160.77
340
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Results – Estimations Second Valuation
Constant
Bid
WTP
SE-wtp
# Obs
RE instead of THERMOELECTRIC – TE (2nd Valuation)
CONTROL
AR
AR + DR
SB
DB
SB
DB
SB
DB
2.16
2.31
1.92
1.79
1.88
1.96
(8.48)
(12.37)
(7.69)
(9.84)
(7.71)
(10.63)
-0.42
(-6.33)
5121.78
413.59
340
-0.49
(-14.97)
4674.47
217.31
340
-0.50
(-7.46)
3849.77
264.62
323
-0.49
(-15.31)
3631.62
226.79
323
Gibson Institute for Land, Food and Environment
-0.43
(-6.83)
4382.92
318.32
340
-0.45
(-15.06)
4359.09
239.77
340
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
Results – SBDBDiff
TREATMENT
Control
AR
AR+DR
HE (1st Valuation)
SB
DB
4776.54 3878.09
(901.53) (191.04)
3787.32 3343.64
(474.09) (161.44)
3425.03 3349.73
(350.79) (160.77)
DIF
898.45
443.68
75.3
TE (2nd Valuation)
SB
DB
5121.78 4674.47
(413.59) (217.31)
3849.77 3631.62
(264.62) (226.79)
4382.92 4359.09
(318.32) (239.77)
Gibson Institute for Land, Food and Environment
DIF
447.31
218.15
23.83
Institute for a Sustainable World
HE (1st Valuation)
DB
SB
TE (2nd Valuation)
DB
SB
DIF
F req u en cy
F req u en cy
Control
** ** *** *
** ** *** *
** ** *** *
** ** *** *
** ** *** *
** ** *** *
** ** *** *
** ** *** *
4022. 472
4679. 235
5335. 999
5992. 762
H_SBWTP2
7306. 289
7963. 052
8619. 815
4782. 942
5098. 728
6059. 724
6501. 072
F req u en cy
F req u en cy
2602. 817
3575. 537
4548. 258
5520. 979
6493. 700
7466. 421
8439. 141
9411. 862
2888. 229
3204. 015
3519. 800
3835. 586
H_SBWTP2
4151. 371
4467. 157
T_SBWTP2
Hi s to g ra m fo r V a ri a b l e H_ S BW T P 2
Hi s to g ra m fo r V a ri a b l e T _ S BW T P 2
F req u en cy
F req u en cy
AR+DR
6649. 525
T_SBWTP2
Hi s to g ra m fo r V a ri a b l e T _ S BW T P 2
Hi s to g ra m fo r V a ri a b l e H_ S BW T P 2
AR
DIF
Hi s to g ra m fo r V a ri a b l e T _ S BW T P 2
Hi s to g ra m fo r V a ri a b l e H_ S BW T P 2
2596. 429
3874. 165
5151. 900
6429. 635
7707. 370
8985. 105
** ** *** *
** ** *** *
3411. 640
3852. 988
4294. 335
4735. 682
H_SBWTP2
Gibson Institute for Land, Food and Environment
5177. 030
5618. 377
T_SBWTP2
Institute for a Sustainable World
Conclusions
• JEEM 2008 and 2009 looks only at significant SBDBDiff .
• This study also considers effect of AR, DR and LDCV on SE
like the American literature.
• As in JEEM 2008, the SE on first SB valuation is several
magnitude greater than other SE.
• AR appears to be almost same reduction in SBDBDIFF and SE
as a repeated valuation in LDCV.
• Adding DR to AR greatly reduces the SBDBDIFF in the first
valuation but even more in the second valuation and it takes
out the strategically behavior.
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Thanks for your attention
Questions
Contact Details:
Claudia Aravena
[email protected]
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World
Results - Responses
Hydropower (1st Valuation)
TREATMENT
Control
(340
responses)
AR
(323
responses)
AR+DR
(340
responses)
Thermoelectric (2nd Valuation)
YY
YN
NY
NN
YY
YN
NY
NN
200
(58.82%)
77
(22.65%)
27
(7.94%)
36
(10.59%)
157
(46.18%)
80
(23.53%)
57
(16.76%)
46
(13.53%)
182
(56.35%)
76
(23.53%)
33
(10.22%)
32
(9.91%)
120
(37.15%)
66
(20.43%)
60
(18.58%)
77
(23.84%)
196
(57.65%)
67
(19.71%)
38
(11.12%)
36
(10.59%)
147
(43.24%)
62
(18.24%)
69
(20.29%)
62
(18.24%)
Gibson Institute for Land, Food and Environment
Institute for a Sustainable World