Effect of substitutes in contingent valuation for a private market good

Ji Yong Lee, John Fox and Rodolfo Nayga

Applied Economics Letters, 2019, vol. 26, issue 14, 1153-1156

Abstract: Economic theory predicts a decrease in valuation as the availability of substitutes increases. This paper describes a contingent valuation (CV) survey that investigates the effect of substitutes on valuation of private market goods. Using an approach that compares willingness to pay (WTP) values elicited from a CV question that accounts for substitutes with WTP values elicited from a similar question without substitutes, we find that allowing for substitutes can moderate WTP values. For the item valued in this study, a hamburger sandwich, allowing for substitutes was associated with a reduction of from 10% to 16% in stated values.

Date: 2019
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DOI: 10.1080/13504851.2018.1540837

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