Scholarly Comments on Academic Economics

Who Knows What Willingness to Pay Lurks in the Hearts of Men? A Rejoinder to Egan, Corrigan, and Dwyer

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Abstract

The present article is the fourth piece in a sequence of articles, the three previous having appeared in Journal of Environmental Economics and Management. In JEEM, Kevin Egan, Jay Corrigan, and Daryl Dwyer published an article with findings from their survey of Ohio residents, collecting contingent valuation data for a wetlands project. They elicit willingness to pay (WTP) with annual and one-time payment schedules in dichotomous choice contingent valuation method questions and compare these to consumer surplus estimates derived from the travel cost method. Using a conservative nonparametric estimator, they conclude that WTP from the annual payment schedule is a “better match” with consumer surplus estimates. Combined with two other analyses, Egan, Corrigan, and Dwyer conclude that “these three arguments make a strong case for matching the duration of a [contingent valuation] survey’s payments with the duration of the proposed benefits, which will most often mean presenting survey respondents with ongoing annual payments” (2015, 134). Dissatisfied with their strong claims, I showed that the contingent valuation method data is of relatively low quality and, with an alternative nonparametric estimator, showed that WTP from the one-time payment schedule is a better match with the consumer surplus estimates. Given the low-quality data, the range of WTP estimates is too wide to draw any conclusions about the most appropriate payment schedule (Whitehead 2017a). In a reply, the authors defend the theoretical validity of their data by appealing to the statistical significance of the entire bid schedule. They conduct three sensitivity analyses, and write that they “overwhelmingly support our original conclusion in favor of using annual payments in” contingent valuation surveys (Egan, Corrigan, and Dwyer 2017). Here, I use parametric approaches to measure WTP and conduct a more complete sensitivity analysis. Egan, Corrigan, and Dwyer’s conclusion that the annual payment results “better match” the consumer surplus estimates is not supported by my analysis. This paper reinforces my initial contention that their contingent valuation data is not useful for the payment schedule issue.