Temporal Insensitivity of Willingness to Pay: How do they evaluate in CVM?

Kim, Soo-Il and Tim Haab ()

No 9972, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: In addition to scope and scale embedding effects, temporal insensitivity of willingness to pay, also known as temporal embedding effect, has been a well known anomaly in eliciting willingness to pay for environmental quality change, especially over time. Stevens et al. (1997) defines two types of temporal embedding effects: strong insensitivity and weak insensitivity to payment schedule. This paper proposes an alternative definition of the temporal insensitivity. Temporal insensitivity implies that a subject in the survey responds consistently to value elicitation questions regardless of payment schemes. The sequential test tests the temporal insensitivity using the oyster reef restoration programs in Chesapeake Bay. Test results show that willingness to pay for the program is insensitive to the payment scheme or to the length of benefit stream of the project. Discount rates imbedded in cost stream vary significantly among the combination of project lengths and payment schemes.

Keywords: Temporal insensitivity of willingness to pay; Temporal embedding effect; Implicit discount rate; Sequential test; Demand and Price Analysis (search for similar items in EconPapers)
Date: 2007

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