Svedsater, Henrik
(2001)
On the validity of contingent valuation: A psychological perspective.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis addresses the validity of the Contingent Valuation (CV) methodology. Unlike conventional economic approaches, this is based on stated preferences in hypothetical market scenarios and is used in attempts to estimate economic benefits of non-marketed public goods, most notably natural resources. However, the methodology is not without controversy and many researchers question people's ability to provide valid economic values for environmental amenities in these contexts. The present research applies a psychological perspective to this area, and hence adopts a different approach than mainstream work in the field that has traditionally been more concerned with methodological procedures and how well data fit with economic theory. The first section presents the rationale of the CV methodology and reviews a number of conceptual problems and empirical anomalies that have been demonstrated across studies and contexts. It sets these within a theoretical framework that, it is envisaged, will contribute to our understanding of people's responses to CV questions. In the empirical section a number of hypotheses derived from this theorising are tested. The results indicate that statements of economic value, particularly for complex amenities, are unresponsive to the magnitude or importance of the resource being valued. Some people also tend to provide, often seemingly 'reasonable' responses, irrespective of their ambivalence toward the valuation procedure. It is further demonstrated that there is a high degree of uncertainty involved in reported economic value, indicating that CV responses are quite imprecise representations of underlying preferences. Finally, hypothetical willingness to pay are shown to be a poor indicator of real economic commitments, resulting partly from the self-image people strive to achieve in these contexts, particularly when choices appear inconsequential. The major conclusions of the thesis are that responses in CV studies to a large extent are motivated by expressive rather than instrumental considerations, that respondents' interpretations of the valuation task do not always correspond with the intention by the researcher, and that situational and contextual factors have important implications for the assessment of environmental benefits.
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