Respondent direct experience and contingent willingness to pay for new commodities: a switching endogenous interval regression analysis

Louinord Voltaire

Applied Economics, 2015, vol. 47, issue 22, 2235-2249

Abstract: Most environmental economists argue that direct experience with the good being valuated, or with similar goods, is a precondition for providing valid willingness to pay (WTP) responses to contingent valuation questions. Two questions are posed in this article. The first is whether previous use experience of a resource (Séné nature reserve) similar to that being valuated (future nature reserves) and located in the same geographical area (Gulf of Morbihan) impacts on WTP. The second is whether accounting for the endogeneity of direct experience matters in the estimation of WTP. We find that respondents who have not experienced the Séné nature reserve provide value estimates that are statistically comparable to that of respondents who have experienced it. Our assumption is that respondents have acquired sufficient and adequate experience of future nature reserves from the questionnaire that experience obtained by experiencing the Séné nature reserve was not necessary for making a valid value formulation. Hence, aggregation of WTP estimates to obtain a total valuation of the future nature reserves is reasonable over the full target population. In addition, our results show that direct experience is endogenously determined; but controlling for the endogeneity has a marginal effect on WTP estimates.

Date: 2015
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DOI: 10.1080/00036846.2014.1002890

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