Validity of Willingness to Pay Measures under Preference Uncertainty

PLoS One. 2016 Apr 20;11(4):e0154078. doi: 10.1371/journal.pone.0154078. eCollection 2016.

Abstract

Recent studies in the marketing literature developed a new method for eliciting willingness to pay (WTP) with an open-ended elicitation format: the Range-WTP method. In contrast to the traditional approach of eliciting WTP as a single value (Point-WTP), Range-WTP explicitly allows for preference uncertainty in responses. The aim of this paper is to apply Range-WTP to the domain of contingent valuation and to test for its theoretical validity and robustness in comparison to the Point-WTP. Using data from two novel large-scale surveys on the perception of solar radiation management (SRM), a little-known technique for counteracting climate change, we compare the performance of both methods in the field. In addition to the theoretical validity (i.e. the degree to which WTP values are consistent with theoretical expectations), we analyse the test-retest reliability and stability of our results over time. Our evidence suggests that the Range-WTP method clearly outperforms the Point-WTP method.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Choice Behavior
  • Climate Change* / economics
  • Cost-Benefit Analysis / economics
  • Germany
  • Humans
  • Marketing* / economics
  • Solar Energy* / economics
  • Uncertainty*

Grants and funding

This paper is part of the project ACCEPT, which is funded by the German Federal Ministry for Education and Research (grant number 01LA1112A). The publication of this article was funded by the Open Access fund of the Leibniz Association. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.