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Experimental Methods for Assessing Environmental Benefits: Volumes I-IV, (1985-1986)

Paper Number: EE-0280A-E, EE-0390

Document Date: 11/1/1985- 06/01/1986

Author(s):  University of Wyoming, University of New Mexico, University of Colorado, US Environmental Protection Agency

Subject Area(s):  Economic Analysis, Air Quality, Benefits Analysis, Human Health Benefits, Stated Preference, Contingent Valuation Method

Keywords: Economic Analysis, Air Quality, Benefits Analysis, Human Health Benefits, Ecological Benefits

Abstract: 

A series of reports were prepared under a grant awarded to the University of Wyoming for the U.S. Environmental Protection Agency focusing on estimating the benefits of pollution control.  Most of the reports prepared under this grant are available for downloading, unless otherwise noted.

Volume Ia.  Valuing Environmental Goods; A State of the Arts Assessment of the Contingent Valuation Method.  This document is the executive summary of a much larger companion report (EE-0280B) whose focus is a state of the art assessment of the contingent valuation method (CVM). The report explores many of the possible sources of bias and related counter-arguments. The larger study is divided into two major parts. Part I, summarized in Section B through F of this summary, is a literature review encompassing the historical setting of the contingent valuation method, its development and uses over a number of years, and potential relevance of research in experimental economics for the approach. Part I also considers the implications for the structure of survey instruments used in CVM, as well as for results of research findings in other disciplines, including psychology. Finally the Part I report focuses on the question of the accuracy of measures derived with the CVM.
Part II of the larger study, summarized in this summary in Sections G through L, presents results of a conference on "An Assessment of the State of the Arts of the Contingent Valuation Method," where the results of the research in Part I were subjected to critical review by a number of environmental economists and by a review panel consisting of Kenneth Arrow, Daniel Kahneman, Sherwin Rosen, and Vernon Smith. Major conclusions concerning the valuation approach are summarized. (Authors: Murdoch, James; Thayer, James; Gegax, Doug; Schulze, William D.; Anderson, Donald; Gerking, Shelby D.; Coulson, Anne; Tashkin, Donald; Anderson, Donald; Dickie, Mark; Brookshire, David S.; Cummings, Ronald G.)

Volume 1b. Valuing Environmental Goods: A State of the Arts Assessment of the Contingent Valuation Method.  This document is a state of the art assessment of the contingent valuation method. The report explores many of the possible sources of bias and related counter-arguments. The study is divided into two major parts. Part I is a literature review encompassing the historical setting of the contingent valuation method, its development and uses over a number of years, and potential relevance of research in experimental economics for the approach. Part I also considers the implications for the structure of survey instruments used in CVM, as well as for results of research findings in other disciplines, including psychology. Finally, Part I report focuses on the question of the accuracy of measures derived with the CVM.
Part II presents results of a 1984 conference on "An Assessment of the State of the Arts of the Contingent Valuation Method," where the results of the research in Part I were subjected to critical review by a number of environmental economists and by a review panel consisting of Kenneth Arrow, Daniel Kahneman, Sherwin Rosen, and Vernon Smith. Major conclusions concerning the valuation approach are summarized. (Authors: Murdoch, James; Thayer, James; Gegax, Doug; Schulze, William D.; Anderson, Donald; Gerking, Shelby D.; Coulson, Anne; Tashkin, Donald; Anderson, Donald; Dickie, Mark; Brookshire, David S.; Cummings, Ronald G.)

Volume II.  Laboratory Experimental Economics as a Tool for Measuring Public Policy Values. This report from the University of Wyoming shows that one approach likely to improve accuracy of the contingent valuation method, and perhaps the only inexpensive one, is a laboratory experimental economics procedure. In a controlled laboratory environment, when actual physical goods with unknown individual value are used in experiments, respondents can be provided with incentives to disclose actual valuations. These responses can then be compared to valuation responses obtained from alternative hypothetical survey questionnaires and for commodities which satisfy or fail to satisfy alternative combinations of reference operating conditions. The research reported herein represents a first step in this process.

The report includes descriptions of three experiments. The first one, described in Chapter 3, compares an actual demand schedule obtained from data collected on door to door sales of pints of fresh strawberries from a random demographic sample of individuals to a demand schedule generated in the laboratory for pints of fresh strawberries using a demand revealing auction mechanism. Also a hypothetical demand curve was generated using a survey instrument. The three demand schedules appear to be equivalent. The second experiment, reported in Chapter 4, involved a bitter-unpleasant taste experience. The third experiment, described in Chapter 5, is similar to the second and involved the same experience except that it was made a pure public good.  (Authors: Coursey, Don L.; Brookshire, David S.; Gerking, Shelby D.; Anderson, Donald; Dickie, Mark; Schulze, William D.; Fisher, Ann).

Volume III. Estimating Benefits of Reducing Community Low-Level Ozone Exposure: A Feasibility Study. The purpose of this feasibility study is to show how to effectively pursue research into measuring the benefits of reduced minor symptomatic discomforts associated with ozone exposure. New benefit estimates are not provided here, although some existing estimates are applied. Instead, attention is directed to showing how an appropriate research methodology can be implement using a sample drawn from the participants in previous studies of chronic obstructive respiratory disease conducted in the Los Angeles area. (Authors: Gerking, Shelby D.; Coulson, Anne; Schulze, William D.; Tashkin, Donald; Anderson, Donald; Dickie, Mark; Brookshire, David S.)

Volume IV.  Valuing Safety: Two Approaches. Reports on the results of a 1984 national mail survey which collected information on individual perceptions of respondents' job-related risks of death, willingness-to-pay and willingness-to-accept measures for hypothetical changes in these risks, and socio-economic data needed for estimating a hedonic wage equation. The goal was to directly compare hedonic and contingent valuation approaches to estimating the marginal value of safety. Information was obtained from each respondent which rendered two separate marginal value of safety estimates: one from an estimated hedonic wage-risk equation and another through a contingent valuation process. The results suggest that the two approaches render mean values of the marginal value of safety which are quite similar. The report also includes an extensive summary of marginal value of safety estimates and theory as well as a bibliography. (Authors: Gegax, Doug; Gerking, Shelby D.; Schulze, William D.; Anderson, Donald).

Volume V: Health and Aesthetic Impacts of Air Pollution on Property Values in the San Francisco Bay and Los Angeles Areas.  Objective of report is to estimate a hedonic housing value equation which includes separate estimates for the health and aesthetic components of air quality.  Aesthetic qualities are measured using information on visual range (visibility) and health qualities are captures with information on ozone concentrations.  (Authors: Murdoch, James; Thayer, James)

This paper is part of the  Environmental Economics Research Inventory.

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