WILLINGNESS TO PAY FOR CARE GOODS?
There are three major methods available to estimate peoples willingness
to pay for enviroinmental (care) goods and services: (where we should
remember
that people will value the environment because of the Use they
get
from it, and also because the value of the Option of being able
to use or enjoy it at some future date, and also because they value the
fact that it Exists, independent of any use or option they may
wish
to exercise on it.
-
Travel Cost: It is possible to survey the actual users
and
enjoyers of natural and cultivated environments - who pay their own
money
to enjoy and make use of these areas of land and their associated
environmental
attributes. The actual expenditure they incur (travel,
accomodation,
entry fees etc.) is taken to represent the minimum value they place on
having access to these environments (they may have been willing to pay
more, but at least they have revealed they are willing to pay this much
to enjoy the benefits. These estimates from the sample of people
surveyed can be grossed up to the population level so long as we know
how
closely the sample fits with the population as a whole. (see, e.g.
Pearce,
D.W. and Turner, R.K, Economics of Natural Resources, Harvester
Wheatsheaf,
1990, p 153ff)
-
Hedonic Price: Some people choose to live in the country
rather
than the city, at least partly because the value the countryside (and
the
care goods and services it provides). An estimate of how much they are
willing to pay can be obtained by comparing the prices of houses in the
countryside with otherwise exactly similar houses in the town. By
comparing
house prices in different locations, with different bundles of
attributes
(property specific attributtes, neighbourhood attributes, accessibility
attributes, and environmental attributes (landscape, wildlife etc.))
associated
with them we can estimate the average willingness to pay for these
attributes
at different levels, at least for those households actually buying and
living in the rural properties. We also need to know how this
willingness
to pay for these households is related to income levels, and other
household
characteristics, in order to be able to gross up this willingness to
pay
for the society as a whole. (see, e.g. Pearce, D.W. and Turner, R.K,
Economics
of Natural Resources, Harvester Wheatsheaf, 1990, p 143ff)
-
Contingent Valuation: Simply (?) ask people how much
they
would be willing to pay for particular (attributes of)
environments.
This is actually far from simple - the answers obtained will depend
critically
on the way in which the questions are phrased and asked. (see, e.g.
Pearce,
D.W. and Turner, R.K, Economics of Natural Resources, Harvester
Wheatsheaf,
1990, p 148ff). The major sources of bias are classifed by Pearce
and Turner as:
-
Strategic: people may reveal less than they are really willing to
pay because they assume that the environment will be provided whatever
they say or pay - the free-rider problem
-
Design - lack of information, the framing of the reference points (e.g
the scale of payments suggested, and the ways in which the payment is
supposed
to be made (the vehicle) can all affect the answers
-
Hypothetical - the question itself is hypothetical - people don't have
to pay now, otherwise we not have to ask the question - do their
answers
actually reflect what they would do if they actually had to pay?
Answer - usually not. The design of choice experiments to elicit
accurate answers to the question is a skilled and complex task
-
Operational - what about all the other decisions which the respondent
is
making and would have to make under the hypotehtical alternative?
How would these actually affect reral willingness to pay?
Given all these very substantial difficulties, why do we use Contingent
Valuation and Choice experiments at all? Because the other two
approaches
(Travel Cost and Hedonic Price) cannot provide answers to how much
people
are willing to pay for the Option and Existence values
of
the environment, since these two methods rely only on those people
actually
using or enjoying the environment now.
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