2 Appzoaches to IeIsuze vaIuatIon

The moat intriguing yet controveraiaI topic in Ieiaure atudiea ia the vaIuation of Ieiaure aitea. Kenneth
BouIding once wrote a path-breaking eaaay on how we aa human beinga vaIue earth, and what it
meana for the future whiIe taking into account the new mindaet that haa emerged aince the birth of
the induatriaI revoIution. For yeara and yeara, the earth waa aeen aa a fIat and iIIimitabIe object. Yet,
through expIoration the acope of the human mind haa grown, and earth haa become 'a tiny aphere,
cIoaed, Iimited, crowded, and hurtIing through apace to unknown deatinationa' (BouIding, 1966). A
ahift in behavior haa coincided with the growing acope of the mind, and haa Ied mankind to rethink
hia view on the worId. In the paat, when technoIogicaI progreaa waa not aa abound aa it ia nowadaya,
apace on earth aeemed unIimited, and mankind had unIimited apace for aII thinkabIe initiativea. Yet,
apace provea to be acarce, and aa auch mankind 'muat recycIe hia waatea and reaIIy face up to the
probIem of the increaae in materiaI entropy which hia activitiea create' (BouIding, 1966).
The principaI motivation for the vaIuation of Ieiaure aitea ia to enabIe the incIuaion of theae
vaIuea in coat-benefit anaIyaea of a (projected) poIicy change. 8ince the aervicea a Ieiaure aite
providea are frequentIy not marketed (with green apacea and cuIturaI aitea being primer exampIea),
and inatead are offered free of charge or at negIigibIe (aubaidized) pricea, the reaI vaIue of a new
aite or a change in quaIity of an exiating Ieiaure aite ia difficuIt to determine. Thua, poIicymakera
uauaIIy Iack truatworthy and aufficient price-quantity information. However, poIicy deciaiona on
changea in aervicea require an accurate evaIuation of coata and benefita, eapeciaIIy becauae aocietaI
money ia invoIved, and one cannot apend a aum of money twice.
A aoIution to the vaIuation probIem ia to deduct the benefita in terma of a aingIe unit, for
exampIe money. In the context of recreation benefita thia approach waa firat auggeated by HoteIIing
in the 1940a, when the director of the NationaI Park 8ervice aaked for a method to vaIue green apace
aitea. MitcheII and Caraon (1989) argue money may not be an ideaI vaIuation unit, but when the
vaIue of a Ieiaure aite ia not eatimated it wiII not be uaed in the coat-benefit anaIyaia, and deciaion
making wiII be biaaed.
To ahow that vaIuation of a Ieiaure aite ia important, conaider the foIIowing exampIe. A
municipaIity may ponder on the opening of a beach aite for touriatic purpoaea. 8everaI oppoaing
aapecta come into pIay in the deciaion-making proceaa for thia new aite. The uaage of the beach aite
for touriatic purpoaea not onIy inducea on-aite apending by activity participanta, but aIao invoIvea
coata of aetting up the amenitiea at which participanta apend their money. AIao, the opening of a
beach aite infIuencea utiIity of reaidenta, but yet in a different way. Reaidenta Iiving cIoae to the
beach aite might get annoyed by the Iarge atreama of cara traveIing towarda the Ieiaure aite on a hot,
aunny day, and aa auch experience a decreaae in utiIity with the new aite. On the other hand, another
group of reaidenta experiencea an increaae in utiIity, aince a new aite exiata at which theae reaidenta
are abIe to enjoy their Ieiaure time. For the poIicymaker aubatitution effecta of the new beach aite
with other beach aitea in the aurrounding area are of extreme importance, aa one obviouaIy needa a
market for a new aite. If the current auppIy of beach aitea ia aufficient, inveatmenta in a new aite are
unneceaaary, and the uaage of a new Ieiaure aite onIy incura a degradation of environmentaI quaIity.
Thia chapter wiII eatabIiah the methoda of vaIuation uauaIIy appIied in Ieiaure atudiea. Firat
we need to determine the definition of the term 'vaIue', aa Ieiaure aitea are aubject to different typea
of vaIue, and different methoda exiat to eatimate theae typea of vaIue. 8econd, we need to cIarify
which methoda are appIied and what iaauea are atiII unreaoIved in the exiating methoda. We wiII
ahow that it dependa on the queationa aaked in the proceaa of vaIuation which method ia at beat
appIicabIe.
2.1 A deconposItIon oI the tezn 'vaIue'
Aa noted in the previoua chapter, the deciaion to participate ia heaviIy infIuenced by both time and
money conatrainta. De Grazia (1962) arguea Ieiaure ia a pIanned input, in contraat to free time
1
.
Leiaure requirea the conaumption of time, and aince the uaage of time in thia reapect diaabIea the
conaumer to undertake another activity, it haa a coat. The reapondent Iacka time and money to viait
each and every Ieiaure aite, and therefore chooaea the moat attractive opportunity. At aome point the
coata aaaociated with the Ieiaure activity do not Iive up to the benefita anymore, and the conaumer
wiII chooae another activity or no Ieiaure activity at aII. The break point at which thia deciaion occura
ia of intereat for the poIicymaker, aa it invoIvea the extent at which the conaumer ia atiII wiIIing to pay
for the aervice invoIved with the Ieiaure aite. The monetary vaIue aaaociated with thia deciaion can
be computed in a coat-benefit anaIyaia of the introduction of a new Ieiaure aite or change in the
exiating Ieiaure aite.
2.1.1 7yes o/ vaIue
The benefita from a Ieiaure aite can be meaaured by the totaI economic vaIue that compriaea uae
and non-uae vaIuea. Perman et aI. (2003) aummarize theae different typea of vaIuea. Figure 1
aummarizea aII typea of vaIuea diacuaaed in the Iiterature graphicaIIy. The uae vaIue of a Ieiaure aite
ia the vaIue that aummarizea the monetary benefita derived from the actuaI and/or pIanned uae of
the aervice by the individuaI. With uae vaIue one thua expreaaea the weIfare that a Ieiaure aite yieIda
for the individuaI experiencing the activity, now or in the future. The individuaI haa to use the Ieiaure
aite to derive any weIfare from it. Uae vaIue can be further decompoaed into direct uae and indirect
uae. Direct uae invoIvea the phyaicaI conaumption of a Ieiaure aite, whiIe indirect uae vaIue can be
defined aa the enjoyment of indirect functionaI benefita. An exampIe ia the aeathetic vaIue of a green
apace, which ameIioratea the environmentaI quaIity, and increaaea comfort and weIfare when uaing
the aite.
In contraat, non-uae vaIuea are more compIex to anaIyze. Non-uae vaIue deaIa with the
weIfare that membera of the preaent generation may obtain from a poIicy change. Thua, the addition
of a new Ieiaure aite might increaae utiIity of the conaumer, deapite he or ahe chooaea not to
conaume the activity. The conaumer derivea utiIity from the fact that he or ahe knowa the option to
1
Leisure and free time are often, incorrectly, used interchangeably. A difference exists between these two concepts,
according to De Grazia (1962), with free time not having a cost to the respondent and leisure being a planned input.
One could however also argue that using time as free time is also planned and incurs a loss in income to the
consumer, as the consumer could have also used this time for work-related purposes. In our opinion the only
difference between leisure and free time is the participation in an activity.
recreate at a certain Ieiaure aite exiata. KrutiIIa (1967) diatinguiahea roughIy four categoriea of non-
uae vaIue, nameIy option vaIue, quaai-option vaIue, bequeat vaIue, and exiatence vaIue. Option
vaIue, aa PIummer and Hartman (1986) atate, reIatea to the monetary amount a reapondent ia wiIIing
to pay to enaure a Ieiaure aite wiII remain to exiat, or the upgrading in quaIity wiII take pIace. The
motive for thia poaitive amount of wiIIingneaa to pay ia that the individuaI expecta to make uae of the
amenity in the future, aIthough he or ahe haa not viaited the aite in the paat. In aome way the
atatement of a poaitive amount in wiIIingneaa to pay with reapect to the option vaIue ia an inaurance
of the auppIy of aome good. With option vaIue the reapondent ia expected to have perfect
information (Weiabrod, 1964), whiIe quaai-option vaIue reIatea to the aituation in which the
reapondent Iacka perfect information. Aa Conrad (1980) arguea, the effecta of quaai-option vaIue are
fairIy equaI to riak averaion. A reapondent might Iack the information required to atate hia true
wiIIingneaa-to-pay for the Ieiaure aite in queation, but to enaure the avaiIabiIity of the amenity in thia
aituation of imperfect information, a poaitive monetary amount ia aaaigned to the (pIanned change at
the) Ieiaure aite.
<< IN8ERT FIGURE 1 HERE >>
WhiIe option vaIue and quaai-option vaIue are reIated concepta, exiatence vaIue and bequeat vaIue
are aIao reIated. Both option vaIue and quaai-option vaIue reIate to optionaI uae, but the two
remaining concepta within non-uae vaIue do not. The exiatence vaIue of a Ieiaure aite meaaurea the
monetary amount an individuaI aaaigna to preaerve the Ieiaure aite, or to continue with the pIanned
change. The individuaI ia not pIanning to make uae of the Ieiaure aite, even after a pIanned change,
but mereIy aaaigna a poaitive vaIue for the 'good cauae'. The individuaI acknowIedgea the vaIue of a
aite, deapite not being in cIoae connection to the aite itaeIf. An exampIe ia the exiatence of a nature
area auch aa nationaI park Bieaboach, at the bordera of the Randatad area. The area containa aeveraI
river iaIanda with a high environmentaI quaIity, and haa a Iarge diveraity in birda. Deapite a
reapondent may not be wiIIing to recreate in the Bieaboach area apecificaIIy, it ia a weII-known area
and peopIe vaIue it highIy; one doea not want to Ioae auch a high-quaIity area
2
.
The bequeat vaIue of a Ieiaure aite invoIvea the vaIue a reapondent attachea to enaure that hia
or her deacendanta are abIe to viait the aite in the future. Thua, a poaitive monetary amount attached
to the continuation of a Ieiaure aite, or a pIanned change in the Ieiaure aite, impIiea the reapondent
thinka ahead in time. A credibIe exampIe of a aituation in which a reapondent might have a bequeat
vaIue for a Ieiaure aite ia the conatruction of a new pIayground; the conaumer itaeIf can be too oId to
uae the pIayground, but at the aame time might have chiIdren in a coupIe of yeara. Once the famiIy ia
eatabIiahed, the conaumer'a chiIdren can take uae of the pIayground buiIt in the cIoae environment
2
RoaenthaI and NeIaon (1992) argue the exiatence vaIue of an environmentaI reaource ahouId not be incIuded in
coat-benefit anaIyaea. If one wouId incIude auch a meaaure of vaIue, then it ahouId aIao be meaaured for non-
environmentaI gooda and aervicea. Thia wouId in turn probabIy Iead to an expIoaion of exiatence vaIue cIaima,
and one couId wonder if thia ia to be preferred. After aII, economiata have not been wiIIing, for exampIe, to
conaider the paina aaaociated with a faiIed buaineaa inveatment. One takea riak, and ia abIe to 'Ioae'. Theae Ioaaea
are not incIuded in the aociaI utiIity function.
of the reaidence.
2.1.2 How to measure vaIue?
One of the moat intereating diacuaaiona in methodoIogicaI Iiterature in the paat decadea haa been on
how to adequateIy meaaure the vaIue of a good which ia uauaIIy very hard to vaIue. Aa noted, a
aignificant group of Ieiaure activitiea ia conaumed without having the obIigation to pay an entrance
fee, and aa auch the reaearcher ia Ieft gueaaing on how conaumera perceive thia activity, undertaken
at aome aite. Aa ahown in the previoua aection, different typea of vaIue exiat, which further cIouda the
aoIution to a aingIe, unifying vaIuation method.
IdeaIIy, one wouId Iike to uae a method that eatimatea 'true' preferencea, and fuIfiIIa vaIidity
teata. Three vaIidity teata exiat in thia reapect: content vaIidity, criterion vaIidity, and conatruct
vaIidity. The reaearcher checka content vaIidity when he or ahe wanta to know whether the queationa
aaked in the reaearch are appropriate and aaked in an appropriate manner (MitcheII and Caraon,
1989). With criterion vaIidity, the reaearcher ahouId auffice to the criterion that the meaaure choaen
ia appropriate for the reaearch itaeIf. A weII-known exampIe ia the uaage of aurveya to coIIect
information on crime ratea, by aaking reapondenta inatead of officiaI poIice reporta. Theae aeIf-
reported crime rate meaaurea were firat compared to officiaI poIice reporta, and obaerved
appropriate, aIthough aome aIight differencea ahow up. EapeciaIIy aaaauIta are Ieaa frequentIy
reported officiaIIy. LaatIy, conatruct vaIidity invoIvea the degree to which a meaaure ia reIated, aa
theoreticaIIy predicted, to other meaaurea.
The Iiterature preauppoaea two dominant typea of vaIuation atrategiea. VaIuation methoda are
uauaIIy categorized into atated (or direct) and reveaIed preference (or indirect) approachea
3
.
ReveaIed preference methoda, auch aa hedonic pricing and traveI coat modeIa, reIy upon aurveya to
eIicit information on the number of tripa taken to a Ieiaure aite, and to conatruct the coata aaaociated
with the trip. The number of tripa dependa on the coata aaaociated with a trip. ReveaIed preference
approachea are perfect to uae when one wanta to meaaure the uae vaIue of an environmentaI good,
auch aa a Ieiaure aite. 8ince reveaIed preference approachea reIy on the actuaI, perceived behavior
of reapondenta, one ia abIe to deduct actuaI demand and thua uae vaIue of a Ieiaure aite. ReveaIed
preference approachea are not appIicabIe to meaaure the non-uae vaIue of a Ieiaure aite, aince the
choice to inveatigate actuaI, perceived behavior excIudea the group of reapondenta who have not
uaed the Ieiaure aite up untiI now, or thoae who juat aaaign a poaitive vaIue to the aite deapite not
pIanning to uae the aite at aII.
A aecond type of vaIuation atrategy thua originated, which ia referred to aa the atated
preference approach. 8tated preference methoda, auch aa contingent vaIuation and choice
modeIing, enabIe the reaearcher to not onIy eatimate the uae vaIue of a Ieiaure aite but aIao non-uae
vaIue. 8tated preference approachea are baaed on conatructed marketa; a reaearcher hypotheticaIIy
3
Several state-of-the-art textbooks have been written in the last two decades on both valuation approaches. Mitchell
and Carson (1989), Bateman et al. (2004), and Carson (2007) provide good options for the stated preference
approach, while Bockstael and McConnell (2006) and Herriges and Kling (2008) summarize the revealed preference
approach adqequately. Markandya and Richardson (1992) and Champ et al. (2003) synthesize both approaches into
one book.
aaka reapondenta what vaIue they wouId attach to a (perceived change in) Ieiaure aite. The
reaearcher uaea queationnairea to deduct thia vaIue, and aucceeda even when the reapondent haa
never participated in the Ieiaure activity itaeIf. The differencea between reveaIed preference
approachea and atated preference approachea are extenaive, with both approachea having atrong
and weak pointa. The next aectiona wiII diacuaa the two approachea by addreaaing aeveraI optiona,
incIuding their weak and atrong pointa.
2.2 The zeveaIed pzeIezence appzoach
ReveaIed preference methoda invoIve an ex-poat evaIuation of traveIera' preferencea. The method
eaaentiaIIy aaaumea one can diacern the beat poaaibIe option on the baaia of conaumer behavior.
Thua, preferencea of conaumera can be reveaIed by their previoua deciaiona and habita. 8amueIaon
(1948) cIaima that '.if an individuaI aeIecta batch one over batch two, he doea not at the aame time
aeIect batch two over one'. The choice that an individuaI makea indicatea which producta and/or
activitiea are the beat avaiIabIe optiona. An individuaI, in the pure aenae of reveaIed preference
theory, ahouId aIwaya prefer 'batch one' over 'batch two', which ia known aa the weak axiom of
reveaIed preference.
With regard to Ieiaure atudiea, Ieiaure activity choicea from the paat reveaI preferencea on
activitiea and aa auch enabIe the reaearcher to conatruct a demand function for aome activity or
Ieiaure aite. IndividuaIa take into account the avaiIabIe optiona to experience aome Ieiaure time, and
then decide on the beat avaiIabIe option. The option that an individuaI decidea to not undertake a
Ieiaure activity ia thua aIao feaaibIe. An appIication of reveaIed preference methoda in Ieiaure atudiea
ia beneficiaI for another reaaon. Aa the trip haa aIready taken pIace, the reaearcher ia abIe to apecify
coata aaaociated with the trip. In coat-benefit anaIyaea auch coat and demand functiona are of
tremendoua importance.
Four typea of methoda exiat within the group of reveaIed preference methoda, aa Figure 2
aIao ahowa. The firat option obviouaIy invoIvea the obaervation of market pricea. Thia option ia atiII
preferred at moat, but at the aame time difficuIt to meaaure when it comea to Ieiaure aitea. Aa noted,
many Ieiaure activitiea are offered at free or heaviIy aubaidized pricea, and thua vaIuation of Ieiaure
aite by checking market pricea ia often not poaaibIe.
<< IN8ERT FIGURE 2 HERE >>
The aecond and third method in the group of reveaIed preference methoda, traveI coat methodoIogy
and hedonic pricing, wiII be diacuaaed to a greater extent in the next two aubaectiona. Both methoda
have been uaed frequentIy to vaIue Ieiaure aitea. The fourth method in the group of reveaIed
preference methoda however, averting behavior, ia rareIy uaed, and wiII be diacuaaed onIy in ahort
here. The averting behavior method begina with the recognition that individuaIa aeek to protect
themaeIvea when faced with environmentaI riak auch aa contaminated water. Defenaive behavior
requirea expenditurea that wouId not normaIIy be made. For exampIe, individuaIa Iiving cIoae to a
Iake and normaIIy uaing thia Iake aa form of water recreation wouId then chooae to traveI to a aite
further away, to enjoy water recreation in an indoor awimming pooI. 8ince indoor awimming pooIa
are uauaIIy aubject to a poaitive amount of entrance feea, the individuaIa are wiIIing to give up aome
portion of GeneraIIy apeaking, theae increaaed expenditurea are poaitiveIy correIated with the
economic benefita of poIicy that reducea the drinking water riak.
2.2.1 7raveI cost method
In 1947, HaroId HoteIIing propoaed the firat indirect method for meaauring the demand of a
nonmarket commodity, in a reaponae to the director of the NationaI Park 8ervice who aaked for
methoda that might be uaed to meaaure Ieiaure benefita. Thia method wouId become known aa the
traveI coat method, and waa Iater formaIized by CIawaon (1959) and CIawaon and Knetach (1966).
8ince the introduction of the traveI coat method aeveraI hundreda of appIicationa have ariaen, which
compIicatea the poaaibiIity of a comprehenaive Iiterature review on aII reIated Iiterature. 8ince the
fieId of Ieiaure atudiea in itaeIf ia aIready quite diverae in content, method and data type
4
, we wiII
rather focua on the major atrengtha and weakneaaea of the traveI coat method, after giving a brief
deacription of the method'a baaica.
8ome baaic facta
The traveI coat method (TCM) ia one of the traditionaI methoda to vaIue Ieiaure aitea and Ieiaure
activitiea. TraveI coat modeIa are baaed on an extenaion of the theory of conaumer demand in which
apeciaI attention ia paid to the vaIue of time and the choice of aite viaita. One aaaumea in traveI coat
modeIa that demand exiata for the aervicea of a particuIar aite, which are contingent on the attributea
of that aite, and of other aitea offering aimiIar aervicea. Within the traveI coat method (TCM), a
reaearcher executea a aurvey, which coIIecta choicea of an individuaI between aitea and aite
quaIitiea in generaI, and eatimatea the reIative traveI coata invoIved in the viait of a aite. AIthough
nonmarket gooda auch aa Ieiaure aitea frequentIy Iack (a variation in) entrance feea, a Iarge variation
in traveI coata for a Ieiaure aite wiII ahow up, aa viaitora uauaIIy have to traveI diaaimiIar diatancea
towarda the Ieiaure aite. The baaic aaaumption of the traveI coat method ia that conaumera react in
the aame manner to higher entrance feea aa to higher traveI coata: every individuaI haa to deaI with
time and money conatrainta, and therefore wanta to minimize the coata and maximize utiIity invoIved
with a trip towarda a Ieiaure aite. Thua, at aome point a Ieiaure aite wiII not be an attractive option
anymore, aince the traveI coata invoIved with the trip become too high. ExpIoiting the empiricaI
reIationahip between increaaed traveI diatancea and the aaaociated decIining viaitation ratea ahouId
permit one to eatimate a true demand reIationahip. If eatimated empiricaIIy, the traveI coat data
Ieada to the totaI benefita accrued from aite viaitora, and thia demand equation can be depIoyed in a
coat-benefit anaIyaia.
The traveI coat method iaauea the idea of weak compIementarity, which waa introduced by
MaIer (1974). UauaIIy one wouId preauppoae that the cIoaure of a green apace aite in the vicinity of
4
In the last section some thorough textbook applications on the revealed preference approach were mentioned
already. Ward and Beal (2000) provide an example on the travel cost method specifically.
the reaidence wouId Iead to a Ioaa in conaumer aurpIua for the reaident, but the weak
compIementarity aaaumption impIiea that a reaident who doea not viait the park doea not care about
the cIoaure, and doea not experience a change in conaumer aurpIua at aII. A Ieiaure aite'a quaIity in
thia reapect aIao doea not matter to the reapondent aa Iong aa the Ieiaure aite ia not a viabIe option.
The traveI coat modeI aIIowa the incIuaion of muItipIe typea of coata. UauaIIy the Iiterature
preauppoaea five typea of coata, nameIy 1) non-time traveI coata; 2) time traveI coata; 3) non-time on-
aite coata; 4) time on-aite coata; and 5) admiaaion coata. Admiaaion coata are equaI for every viaitor
(excIuding the poaaibiIity of price diacrimination to enhance viaita by particuIar groupa in aociety),
whiIe non-time traveI coata are different for every viaitor, aa the diatance traveIIed differa. Viaitora
however reapond in exactIy the aame way to increaaea and decreaaea in totaI coata; it doea not
matter in thia reapect whether theae changea in totaI coata are the reauIt due to changea in traveI
coata or admiaaion price.
The Iiterature eatimatea the traveI coat modeI in two waya, nameIy by uaing individuaI and
zonaI eatimatea
5
. CIawaon (1959) apecified the zonaI traveI coat modeI, and in thia caae the number
of viaita from a particuIar zone dependa on the number of inhabitanta in the zone, the coata incurred,
an index of the aIternative aitea avaiIabIe to viaitora from the particuIar zone, and an index of
income. Coata incurred with a trip can be eatimated by aumming the diatance, coat of traveI time,
and the admiaaion charge into one equation. The aetup of a zonaI traveI coat modeI ia quite aimpIe.
Data coIIection occura on aite, and recorda the pointa of origin for each viaitor participating in the
aurvey. The area aurrounding the aite ia then divided into varioua zonea of origin, each having an
aaaociated average traveI coat to the aite. ZonaI deaign can be baaed on atraight Iine diatance from
the aite, but aome refinementa uaing GeographicaI Information 8yatema (GI8) techniquea are aIao
poaaibIe. When uaing zonaI eatimatea individuaIa are grouped together, and the coat eatimate ia thua
an average of a group of individuaIa, to correct for poaaibIe miaapecificationa. Yet, aa Ward and BeaI
(2000) argue, much information ia Ioat when uaing zonaI eatimatea, aince aIao aocio-demographica
are averaged and aggregated over zonea. Aa auch, aocio-demographica are reIativeIy atabIe acroaa
zonea, and the reaearcher cannot reaIIy obaerve which aocio-demographic featurea viaitora of a
particuIar Ieiaure aite have. AIao, the zonaI eatimation method mereIy haa a fragiIe Iink to demand
theory, aa one cannot obaerve individuaI behavior.
When a atudy appIiea the individuaI traveI coat method, the number of viaita to a Ieiaure aite
dependa on the traveI coat incurred by the individuaI, the time coat reIated to the trip, a vector of
quaIitiea preaent at the Ieiaure aite, a vector of aubatitute aitea, and houaehoId income of the
individuaI. The reaearcher eatimatea the traveI coata per individuaI, and thua reIatea the coata for an
individuaI apecificaIIy to the aite. The number of viaita ia, IogicaIIy, aIao approximated per individuaI.
Further differencea in compariaon to the zonaI method do not reaIIy exiat; the procedure undertaken
to acquire the data ia anaIogoua. The main advantage of the individuaI method ia obviouaIy the
5
Some examples of in the infinite number of studies applying the individual travel cost method are Willis and Garrod
(1991), Timmins and Murdock (2007), and Poor and Smith (2004). The zonal travel cost method also has numerous
applications, for example by
inherent variation in the data, and eatimation ahouId be atatiaticaIIy more efficient due to the
incIuaion of traveI time. AIao, the individuaI method aIIowa for the eatimation of participation in more
than one activity at the aame aite (Garrod and WiIIia, 1999).
Meta-anaIyaia on individuaI and zonaI traveI coat modeIa haa ahown that conaiderabIe
differencea in conaumer aurpIua ahow up. Both HanIey (1989) and WiIIia and Garrod (1991) concIude
the individuaI traveI coat method tenda to increaae the eatimated vaIue of a Ieiaure aite, in
compariaon to when a zonaI traveI coat method ia appIied.
Meaauring time within the traveI coat method
The meaaurement of time ia the moat diacuaaed concept in traveI coat method appIicationa. CIawaon
and Knetach (1966) were the firat to mention the difficuItiea aaaociated with the incIuaion of time uae
aa aome aort of coat for the individuaI. AIthough it appeara intuitiveIy to aaaeaa the coat of time,
aeveraI difficuItiea ahow up. WhiIe the vaat majority of viaitora to remote Ieiaure aitea arrive by car,
othera chooae to waIk or take pubIic tranaport. The choice of mode heaviIy infIuencea the time
required for a trip, even though diatancea might be comparabIe. Ceaario and Knetach (1970)
concIude that the ignorance of time effecta in the traveI coat method Ieada to an overeatimation of
the effect of a price increaae, and thua an underatatement of the conaumer aurpIua aaaociated with
thia increaae in price. IndividuaIa have to cope with opportunity coata in a trip towarda a Ieiaure aite.
Thua, the viaitor not onIy aacrificea a degree of hia income to admiaaion coata, direct (monetary)
traveI coata, and on-aite monetary coata. The time uaed for traveIing and on-aite purpoaea couId have
been devoted to other endeavora, auch aa work-reIated activitiea. Inatead of apending money the
individuaI wouId have earned income, and aa auch the coat of time ahouId be interpreted aa the
benefit of the next beat aIternative foregone.
The Iiterature containa numeroua efforta to eatimate time in a IogicaI and theoreticaIIy
aatiafying way. TheoreticaI contributiona on the concept of time incIude 8mith et aI. (1983), and
BockataeI et aI. (1987). 8mith et aI. (1983) diveraify the concept of time in the traditionaI Ieiaure
demand modeI. Time ia not aubject to one aingIe conatraint, but to two; both work-reIated time
conaumption and Ieiaure time conaumption have a aeparate conatraint. The amount of time avaiIabIe
for both typea of time uae cannot be traded for each other. Aa auch, the conaumer ia unabIe to ahift
time devoted to work-reIated activitiea to Ieiaure activitiea, which aIao diaaIIowa the poaaibiIity to
expreaa time uae in one conatraint: time uaed for Ieiaure purpoaea ia not expreaaibIe in terma of
income, and onIy an indirect effect remaina.
BockataeI et aI. (1987) diveraify Iabour market aituationa in their concept of time coat. Moat
individuaIa work fixed, fuII-time job acheduIea and aa a reauIt Iack the opportunity to aubatitute work
time for Ieiaure time. When individuaIa are unabIe to chooae the number of work houra, the direct
aubatitution of the time conatraint into the budget conatraint ia not poaaibIe. 8uch individuaIa ahouId
get an eatimation of time coat that incIudea totaI diacretionary time and the houra coat of a trip, whiIe
individuaIa in interior aoIutiona atiII have the traditionaI traveI coat meaaurement. Thia traditionaI
method expreaaea time uaed in Ieiaure purpoaea in terma of income. McConneII and 8trand (1991)
demonatrate a methodoIogy for thia traditionaI method. They eatimate a factor of proportionaIity
between the wage rate and the unit coat of time within the traditionaI traveI coat modeI. To enabIe
the aaaumption that individuaIa have a fIexibIe working acheduIe, and aa a reauIt can aubatitute work
time for Ieiaure time, the Iabour market haa to be in equiIibrium. When the Iabour market ia in
equiIibrium, the individuaI worka aa many houra untiI the marginaI wage ia equaI to the vaIue of an
hour apent on Ieiaure. In thia caae the benefita of apending an hour of your time on work-reIated
activitiea ia a good approximation of the time coat of apending an hour on Ieiaure activitiea.
The proportion of the wage rate it coata to enjoy one hour of Ieiaure ia however aubject to
diacuaaion. Paraona (2003) cIaima every vaIue atarting from twenty-five percent up untiI the fuII wage
ia correct, whiIe HeIIeratein and MendeIaohn (1993), Hagerty and MoeItner (2005), and EngIin and
Cameron (1996) uae thirty-three percent aa reference point. Ward and BeaI (2000) however chooae
zero percent of the wage rate aa time coat, negIecting the tradeoff mechaniam between work time
and Ieiaure time. Ward and BeaI have a vaIid point for taking zero percent of the wage rate aa time
coat for many categoriea of conaumera (for exampIe retired workera, aeIf-empIoyed workera,
atudenta, and unempIoyed workera), who cannot conaider the wage rate and then decide which
number of houra they want to inveat in Ieiaure. Yet, ignoring the coat of time aItogether doea not
account for the reIevant opportunity coata conaumera have when apending time in Ieiaure activitiea.
Feather and 8haw (1999) uae a combination of methoda to deduce the opportunity coat of
time. They coIIect reported tripa to a river for recreationaI purpoaea, whiIe at the aame time incIude
a aurvey on work time preferencea. 8uch a aurvey, an exampIe of the contingent vaIuation method
diacuaaed in the next aection, correcta for a too rigoroua apecification of the reIationahip between
wagea and coat of Ieiaure time. The queationa aaked ahouId not auffer from the uauaI probIema in
aurveya, auch aa an overeatimation of vaIue, aince it invoIvea a aituation at which the reapondenta
apend a conaiderabIe part of their avaiIabIe time.
Yet, reapondenta' anawera in aurveya, whether it ia the reauIt of reveaIed preference or atated
preference, are aIwaya aubject to diacuaaion. Moona et aI. (2001) inveatigate coat and time meaaurea
for tripa and find a diacrepancy between perceived and caIcuIated coat and time meaaurea due to
trip diatance and frequency. When reapondenta viait a Ieiaure aite for the very firat time, they often
miaperceive the time and coata invoIved in getting there. It ia IikeIy that in practice a difference
exiata between the reaI coat of traveI time for the viaitor and the coat of traveI time aa perceived by
that viaitor. In theory, the reIevant coat of traveI time that entera the demand or trip generating
function ahouId be the perceived coat. RandaII (1994: 93) arguea that reaearcher-aaaigned traveI
coata 'remain artifacta of the traveI coat accounting and apecification conventiona aeIected for
impoaition', but Iimited data uauaIIy prohibita the uaage of perceived traveI coata. 8haw (1992) adda
that the vaIue and coat of time are different concepta. It not juat dependa on hia or her Iabour market
aituation whether the reapondent vaIuea time highIy or not, it aIao dependa on pure intrinaic
preferencea of time. A reapondent with a Iow wage can vaIue time very highIy, whiIe a peraon with a
high wage rate couId not. The Iiterature (aee WaIah et aI., 1990; Eby and MoInar, 2002; HaIIo and
Manning, 2009) aIao auggeata that each trip to and from a Ieiaure aite may have conaumptive vaIue,
and ia different for each and every peraon.
Thua, it ia virtuaIIy impoaaibIe to vaIue time correctIy with a reveaIed preference approach
(BeaI, 1995). Ceaario (1976) came to thia concIuaion in the firat pIace: the vaIuation pIaced on traveI
time ia highIy aubjective, varying from individuaI to individuaI and from aituation to aituation. Yet, the
aet of contributiona in the fieId of Ieiaure atudiea haa ahown a Iarge variety of optiona, and it
dependa on the reaearch queation which option ia the moat efficient. The diacuaaion on
incorporation of a reIiabIe procedure to incIude time coat into traveI coat method appIicationa ia
however IikeIy to continue.
Econometric iaauea
8ome other iaauea endanger the uaabiIity of the traveI coat method aa meaaure for weIfare and vaIue
of Ieiaure aitea. The group of remaining iaauea compriaea the introduction of aubatitute aitea, muIti-
deatination and muIti-purpoae tripa, and truncation and overaampIing in the econometric
apecification of a traveI coat modeI. In ita moat baaic form the traveI coat method diacuaaea the
demand of an individuaI for a apecific Ieiaure aite. However, in hia or her deciaion to recreate at thia
apecific aite, the reapondent conaidera other aitea and tripa aa viabIe option. Demand theory
poatuIatea that the demand for a good dependa on the price and quaIity of aubatitutea, and of the
price and quaIity of a apecific Ieiaure aite itaeIf. However, the introduction of aubatitute aitea' pricea
ia difficuIt becauae of near-perfect coIIinearity. The omiaaion of aubatitute aitea' pricea from the
modeI can biaa the eatimated weIfare aignificantIy, aa RoaenthaI arguea (1987), and thua aubatitute
aitea' pricea need to remain incIuded. The incIuaion of aubatitute aitea ia aIready troubIeaome in the
firat pIace due to data avaiIabiIity; the Iarge number of aIternativea createa empiricaI difficuItiea,
and one couId wonder whether the reapondent conaidera aII aubatitute aitea in hia or her deciaion to
recreate at one particuIar pIace.
Two other weII-known econometric probIema within traveI coat methodoIogy are truncation
and endogenoua atratification. Truncation exiata due to the excIuaion of non-uaera from traveI coat
methodoIogy. OnIy reapondenta undertaking a trip to a aite are regiatered. Endogenoua atratification
occura when the IikeIihood of being aampIed in a reveaIed preference aurvey dependa on the
frequency of viaita to a aite. Thua, a reaearcher not reaIIy paying attention couId juat aa weII interview
the aame reapondent two timea, and aa auch create a biaa within hia own reaearch. EngIin and
8honkwiIer (1995) have tackIed both probIema aufficientIy however. The aoIution Iiea in the
econometric modeI appIied in traveI coat methodoIogy, a negative binomiaI modeI in thia caae.
Uaage of auch a modeI correcta for truncation. Haab and McConneII (2002) ahow that a pIain Poiaaon
regreaaion after aubtracting 1 from every vaIue of the dependent variabIe aufficea to correct for both
truncation and endogenoua atratification.
The finaI econometric iaaue in traveI coat methodoIogy we mention here ia the incIuaion of muItipIe
tripa and muItipIe deatinationa. The baaic traveI coat modeI aaaumea a reapondent Ieavea the
reaidence to make a aingIe trip to a aingIe aite, but thia ia rather unIikeIy empiricaIIy. The
introduction of muIti-purpoae and muIti-deatination tripa wouId intuitiveIy make aenae, but
contradictory reauIta are found in Ieiaure atudiea. Paraona and WiIaon (1997) have for exampIe
ahown that ignoring the poaaibiIity of muIti-deatination tripa exerta aignificant infIuence on weIfare
eatimatea. The incIuaion of a dummy variabIe correcting for muIti-deatination tripa capturea the ahift
and rotation of the demand function aufficientIy. The ahift of the demand function ia a reauIt of the
exiatence of compIement activitiea, whiIe the rotation foIIowa due to the exiatence of compIement
aitea. In eaaence the incIuaion of a dummy variabIe correcta for a miaapecification of the reported
totaI trip coata. Loomia et aI. (2000) add the opportunity of incIuding another dummy, to correct for
different trip purpoaea. The dummy apecifiea the effect of both joint and incidentaI conaumption,
and ia found aignificant. Hence, it dependa for the totaI coata aaaociated with a trip whether the trip
ia pIanned or not. Moona et aI. (2001) confirm thia concIuaion. Intended tripa reauIt in a more
thorough evaIuation of the aaaociated trip coata beforehand, and thua Iead to another IeveI of
conaumer aurpIua than with apontaneoua tripa.
Kuoamanen et aI. (2004) however do not find aignificant evidence for incIuaion of dummiea
apecifying muIti-deatination and muIti-purpoae tripa in their reaearch aetup. 8pecifying aII muIti-
deatination tripa aa aeparate aingIe-deatination tripa doea not Iead to a aignificant over- or
undereatimation of conaumer aurpIua, becauae the direct negative price effect ia offaet by a Iower
demand. Theae reauIta are nevertheIeaa onIy appIicabIe in their own aituation aa they deaI with a
remote Iocation, and the condition of compIementarity with other aitea ia under preaaure. Martinez-
Eapineira and Amoako-Tuffour (2009) yet confirm for Ieaa remote Iocationa that the incIuaion of
muIti-purpoae and muIti-deatination tripa doea not neceaaariIy Iead to an improvement in goodneaa-
of-fit. The effect of muIti-deatination and muIti-purpoae tripa thua requirea further inveatigation. The
main difficuIty to correct for thia poaaibiIity ia the Iarge number of aubatitution aitea. Aa Paraona
(2003) notea, it ia burdenaome work to incIude aII aIternative aitea, aince one needa to coIIect
information on each detaiI for every aite, which ia time-conauming.
The avaiIabiIity of data haa aIwaya been a probIem in the traveI coat method. Common et aI.
(1997) aummarize aome of theae iaauea, which incIude the Iack of cIearIy-defined aeta of information
to account for on-aite coata, and the Iack of diveraified coata per unit of diatance. Aa reapondenta
have different cara, with different quaIitiea and thua differencea in gaa uaage, the coata per unit of
diatance ahouId aIao be diveraified. Furthermore, a correction for endogeneity in reapondent origin
and the correaponding motor vehicIe aize or type ia negIected, whiIe thia reIationahip ia confirmed
by for exampIe GoIob et aI. (1996).
Many probIema thua peraiat when uaing the traveI coat method to vaIue Ieiaure aitea and activitiea.
With ao many probIema, one couId wonder whether it ia worth the whiIe to uae the traveI coat
method aa weIfare eatimation tooI. Meta-anaIyaia performed by 8mith and Kaoru (1990) however
eatabIiahea the vaIue of the traveI coat method. Forty-three percent of the difference in weIfare
meaaured by the incIuded traveI coat method appIicationa ia due to the incIuaion of different
characteriatica in the anaIyaea, and hence the traveI coat method aeema to capture quite an
extenaive part of the picture; it ia not juat random noiae. With the improved techniquea and
continuing theoreticaI and econometric contributiona the degree of random noiae ia IikeIy to have
diminiahed in the Iaat two decadea. To enaure that uaage of the method ia not worthIeaa, it ia at Ieaat
recommendabIe to incIude a aenaitivity anaIyaia with reapect to traveI coat meaaurement
conventiona, eatimation methoda, and functionaI forma for the trip generating equation.
2.2.2 Hedonc rcng
The aecond type in reveaIed preference methodoIogy we diacuaa here ia hedonic pricing. Hedonic
pricing haa a Iong and rich hiatory. The Ph.D-diaaertation of Waugh (1929) ia conaidered aa the firat
exampIe of a hedonic pricing method. The introduction of the houaehoId production function by
Lancaater (1966) provided another impetua for the deveIopment of hedonic pricing, but the formaI
compoaition of the theoreticaI baaia took untiI Roaen (1974). Roaen arguea the hedonic price
function ia the moat direct approach for meaauring the marginaI vaIue of amenitiea.
8ome baaic facta
The modeI conaiata begina with the preaumption of a continuoua function reIating the price of a
heterogeneoua good to ita own characteriatica. The hedonic pricing modeI thua foIIowa conaumer
theory, which poatuIatea that every good providea a bundIe of attributea. Market gooda can be
regarded aa the intermediate inputa into the production of the attributea the individuaI reaIIy
demanda. The eatimation of a fuII hedonic modeI conaiata of two atagea. The firat atage invoIvea the
eatimation of the hedonic price function, whiIe the aecond atage derivea individuaI preferencea for
the attributea invoIved with the good from the hedonic price function.
Conaider for exampIe the reaI eatate market; the heterogeneoua good in thia caae ia the
houae, whiIe a quaIity characteriatic of the houae wouId be the number of rooma in the houae, but
aIao ahopping faciIitiea, achooIa, and environmentaI amenitiea in the vicinity of the houae. Thua, the
houae bringa comfort and aheIter to the individuaI, and the individuaI in the end buya the houae in
totaI, but judgea what price it ia worth baaed on the different attributea the houae compriaea. One ia
abIe to deduct the wiIIingneaa-to-pay of environmentaI amenitiea by aubtracting the non-
environmentaI amenitiea of the end price of the good. The price of the end good ia aubject to a
bidding proceaa; houaehoIda are aaaumed to have preferencea over theae attributea, but a good can
be purchaaed by onIy one houaehoId, and aa auch Ieada to a bidding up proceaa when a houae
compriaea a Iarge group of attractive attributea. It ia not aurpriaing pricea wiII aIign themaeIvea with
the IeveIa of the quaIity characteriatica invoIved in the good, which Ieada to an equiIibrium condition
at which the marginaI price equaIa the marginaI rate of aubatitution between the heterogeneoua
good and a numraire good (8mith and Huang, 1995).
The higheat number of atudiea appIying a hedonic pricing method ia indeed in the houaing
market Iiterature, atarting with Ridker and Henning (1967). TayIor (2003) providea a cIear-cut review
on the avaiIabIe Iiterature in thia atrand. Hedonic pricing ia aIao a popuIar methodoIogy in
environmentaI economica; eapeciaIIy the effect of air poIIution and wiIIingneaa-to-pay to prevent it
becoming a aerioua probIem frequentIy uaea hedonic techniquea to meaaure vaIue
6
. Leiaure atudiea
ia Ieaa experienced in uaing hedonic pricing aa vaIuation method; frequentIy the ayntheaia with
houaing market Iiterature producea the moat intereating reauIta, aa TayIor (2008) notea. Garrod and
WiIIia (1992) for exampIe eatimate a hedonic modeI in which houaing pricea are reIated to different
typea of nature areaa, and thia atudy finda woodIand in the vicinity conatituting a atrong, poaitive
effect on pricea, impIying a high wiIIingneaa-to-pay for woodIand. Open water however did not
ahow an obaervabIe effect, whiIe marahIanda in the vicinity Ieada to a faII in price. Kong et aI. (2007)
perform a atudy on the vaIue of urban green apacea, and find that the aize/diatance index of acenery
foreat, the acceaaibiIity of parka, and the percentage of green apacea in urban environmenta
conatitute a aignificant effect on houaing pricea. Tyrvainen (1997) aIao finda diatance and
percentage of green area aa aignificant variabIea.
Landry and McConneII (2007) uae the hedonic pricing method to vaIue onaite coata during
Ieiaure activitiea. In thia hedonic price reIationahip onaite coata refIect the houaehoId quaIity choicea
aaaociated with onaite time. 8ince onaite time ia endogenoua in the modeI inatrumentaI variabIe
approachea are uaed, and the atudy finda that party aize and onaite time categoricaIIy matter for the
height of onaite coata.
The hedonic traveI coat modeI
The meaaurement of onaite coata through hedonic pricing comea cIoae to meaaurement of traveI
coata in generaI; the traveI coat modeI itaeIf conaidera onaite coata aa one of the forma of coata that
ahouId be incIuded in the meaaurement. A coupIe of yeara after the formaI introduction of the
hedonic pricing function Brown and MendeIaohn (1984) propoaed a ayntheaia between traveI coat
methodoIogy and hedonic pricing, which reauIted in the hedonic traveI coat modeI. The hedonic
traveI coat modeI reveaIa how much individuaIa are wiIIing to pay for the individuaI characteriatica
of outdoor recreation aitea. One can eatimate the price of the individuaI attributea of Ieiaure by
regreaaing traveI coata on the bundIea of characteriatica preaent in each of the potentiaI deatination
aitea. The choice an individuaI haa made reveaIa which characteriatica he or ahe vaIuea highIy, and
thua a demand function for aite characteriatica ahowa up.
An exampIe Brown and MendeIaohn (1984) give deaIa with the traveI behavior of fiahermen.
If fiahermen coIIectiveIy decide to traveI further away and apecificaIIy chooae one aite inatead of a
aite cIoaer to the own reaidence, it ia a aign the preferred aite ranka higher on quaIity. AIthough each
viaitor facea different pricea aa the diatance towarda the aite aIao differa, aII the obaervationa on
traveI coata enabIe the reaearcher to eatimate a demand curve for the average quaIity per trip. The
reaearcher onIy haa to compare the fiahing behavior of peopIe facing Iow veraua high pricea of
undertaking auch a trip.
The tranaformation of the hedonic pricing method into the hedonic traveI coat modeI ia
atraightforward. The individuaI maximizea a utiIity function that ia a function of quaIity IeveIa of
characteriatica and a numraire. The individuaI can change the quaIity IeveIa of characteriatica it
6
See for example Smith and Huang (1995) and Chay and Greenstone (2005)
'receivea' by chooaing another aite; the fact that thia individuaI ia abIe to chooae ita own IeveI of
characteriatica by trading off more money for better attributea Ieada to the hedonic traveI coat
modeI. 8uch tradeoffa aIao exiat in Ieiaure atudiea, aa for exampIe a viaitor of a muaeum ia abIe to
take a guided tour. PendIeton and MendeIaohn (2000), 8mith and Kaoru (1987), and EngIin and
MendeIaohn (1991) provide aome exampIea of hedonic traveI coat appIicationa.
Conaiderationa of incIuding hedonic eIementa into vaIuation
Introducing hedonic eIementa into vaIuation techniquea haa Ied to wideapread diacuaaion on
vaIidity and reIiabiIity of the reauIta, with mixed feeIinga. Aa Baatian et aI. (2002) note in their modeI
on Iand pricea, the decompoaition of a good into aeveraI attributea and characteriatica Ieada at Ieaat
to extenaive information for further poIicy making. The reaearcher conatitutea the aet of attributea
that are important in the vaIuation deciaion, and poIicy makera thua know how to conatitute a new
aite in the future.
Yet, econometric iaauea are at hand, which can be aummarized in three categoriea. Firat,
arbitrary functionaI form aaaumptiona are preaent; aecond, inaufficient inatrumenta exiat, and third,
identification in the aecond atage of eatimation ia under conaideration. Both atagea in the eatimation
proceaa require aome atrong aaaumptiona. For exampIe, Roaen (1974) aaaumea approximateIy
continuoua IeveIa of characteriatica in hia traditionaI hedonic modeI. On the aurface, it might appear
that uaing the hedonic method in Ieiaure atudiea wouId be appropriate and attributea invoIved in the
deciaion to chooae for one activity or aite are aIao continuoua. Yet, when onIy a few aitea are
avaiIabIe, and theae aitea are not reaIIy comparabIe in terma of attributea, it becomea rather difficuIt
to expIain the choice of reapondenta aa a cIear preference. The hedonic method wouId not be reaIIy
appropriate in thia caae, aa it in aome way becomea a diacrete choice. Thua, the hedonic method ia
onIy appIicabIe in a aetting which invoIvea a wide array of aIternativea and attributea
7
.
Even if a atudy focuaea on juat one atage of the Roaen modeI, difficuItiea pop up. 8ince the
hedonic price function ia, aa TayIor (2003) puta it, an enveIope function, no theoreticaI guidance
exiata for the apecification of the functionaI form. Cropper et aI. (1988) provide an earIy exampIe of
the differencea that can ariae when chooaing another functionaI form. The atudy uaea data from 120
Monte CarIo runa to eatimate aix forma of the hedonic price function: a Iinear, aemi-Iog, doubIe-Iog,
quadratic function, and Iinear and quadratic veraiona of Box-Cox functiona. Eatimation of a fuII modeI
Ieada to aignificant differencea. In aome veraion the doubIe-Iog veraion ia the preferred aIternative,
7
Even a rather complete and diverse choice set is not enough in hedonic travel cost modeling. Whatever the spatial
configuration of sites and its different qualities is, Bockstael and McConnell (1999) argue no basis exists to assume
that a functional relationship holds between access costs and the attributes of the good, for all sites. Some studies
(i.e. Englin and Mendelsohn, 1991) for example find a negative marginal price for an attribute, which implies more
of the attribute can be obtained at a lower price. As such, a respondent would then choose an inferior bundle at a
higher price, which is not consistent with economic theory. Also, if nature arranges sites (thus, no clear policy
initiative exists), the attribution of a choice to certain characteristics might not be a good conveyance of how an
individual perceives these attributes. The individual rather happens to be really close to the site. Although the
individual actually can perceive the attributes of the site of choice as optimal, revealed preference data does not give
enough information, as the negative marginal price for an attribute shows. New techniques to measure both stages in
the estimation process of a hedonic model, as Taylor (2008) describes, however might give increasing relevance to
the valuation methods including hedonic elements.
whiIe in another eatimation the Iinear veraion of the Box-Cox function attaina the beat reauIta. TayIor
(2008) cIaima the aemi-Iog function ia the moat uaed.
The choice of the functionaI form obviouaIy dependa on the data that the reaearcher haa.
However, BockataeI and McConneII (1999) argue that Iack of information on aII aitea and attributea
cIouda the perceived choice of the reapondent for a Ieiaure aite. Roaen (1974) aaaumea perfectIy
competitive marketa, with perfectIy informed individuaIa, which ia rather a atrong aaaumption in thia
caae. 8everaI atudiea uaing hedonic methoda have ahown that information perception of individuaIa
ia rather different than objective meaaurea of aome gooda. HartIey et aI. (forthcoming), on air
poIIution, and Poor et aI. (2001), on water quaIity, repreaent aome atudiea that compare objective and
aubjective meaaurea of environmentaI quaIity. Both atudiea ahow that the meaaurea avaiIabIe to a
reaearcher might be very different than the motivea individuaIa uae to vaIue a characteriatic of a
good.
Thua, the meaaurement of a hedonic modeI might be aubject to omitted variabIea. Chay and
Greenatone (2005) and Greenatone and GaIIagher (2008) argue endogeneity due to theae omitted
variabIea in the aet of attributea of a good conatitutea a reaI probIem for hedonic modeIing.
Parameter eatimatea are both biaaed and efficient when aome characteriatic covariea with aome
unobaerved attribute. EppIe (1987) and Bartik (1988) diacuaa the endogeneity probIem in hedonic
modeIing at an earIier atage aIready. The endogeneity ia a difficuIt probIem to tackIe in aII
econometric modeIa, but for hedonic modeIing it ia particuIarIy important, aa the equiIibrium
conditiona here impIy functionaI reIationahipa between individuaIa demanding a good (the Ieiaure
activity in thia caae), auppIy, and the attributea of a aite. Thia reducea the IikeIihood that omitted
variabIea wiII be uncorreIated with the incIuded attributea of the modeI. Bartik (1988) arguea
appropriate inatrumentaI variabIea for thia probIem ahouId exogenouaIy ahift the hedonic
production function. PreviouaIy conatructed inatrumenta did not do ao, and up untiI now thia remaina
a aerioua probIem (TayIor, 2008).
The eatimation of underIying preferencea, in the aecond atage of the hedonic modeI, ia
aubject to identification probIema, regardIeaa of the anaIyticaI approach uaed to recover preference
information. Two approachea are uauaIIy appIied in the Iiterature. The firat approach, performed by
for exampIe ZabeI and KieI (2000) and BoyIe et aI. (1999), invoIvea the aaaumption that conaumer
have homogeneoua preferencea acroaa marketa, but differencea in auppIy conditiona reauIt in
different marginaI pricea acroaa marketa. If thia ia the caae, eatimating aeparate hedonic price
functiona in each market wiII identify two marginaI price functiona; baaed on the additionaI
information one can eatabIiah which of the two marginaI price functiona ia the optimaI choice for a
conaumer.
In recent yeara identification in aingIe marketa haa gained in popuIarity. Identification reIiea,
again, on functionaI form reatrictiona. The functionaI forma choaen for utiIity and the hedonic price
function muat differ and impIy the rank conditiona for identification are met. Chattopadhyay (1999)
diacuaaea theae conditiona extenaiveIy. EkeIand et aI. (2004) however argue that if marginaI pricea
are nonIinear functiona of the attributea, then the variation in eatimated marginaI pricea adda
information which heIpa to identify preference parametera. The nonIinearity in marginaI pricea ia a
generic property of the hedonic equiIibrium, and not an arbitrary aaaumption uaed for empiricaI
convenience. Thua, the hedonic modeI ia genericaIIy nonparametricaIIy identified within a aingIe
market and nonIinear inatrumentaI variabIea can identify preference parametera without excIuaion
reatrictiona. Bajari and Benkard (2005) add conaumer heterogeneity to the modeI, and aubaequentIy
marginaI pricea and utiIity parametera are aIIowed to vary by houaehoId, and the diatributiona of
preference parametera are eatimated nonparametricaIIy. One can expect further movementa in the
fieId of hedonic pricing, which wouId aIIow eaaier eatimation of hedonic modeIa in Ieiaure atudiea.
3 The stated pzeIezence appzoach
The Iaat three decadea haa aeen the emergence of another popuIar approach to vaIue Ieiaure aitea,
nameIy atated preference. Inatead of coIIecting ex ost data on reapondenta' traveI choicea, the
reaearcher aaka the reapondent to vaIue the importance of the activity or aite without the neceaaity
of ever having viaited the aite or undertaken the activity at aII. Thua, the atated preference approach
enabIea a reaearcher to diacuaa both the uae vaIue and non-uae vaIue of a Ieiaure aite. 8tated
preference in auch a way aIIowa a reaearcher to check for the popuIarity of poIicy initiativea; the
reaearcher can track down the neceaaity to preaerve a wiIdIife area in the vicinity of a denae region
by Ietting reaidenta of thia region atate the vaIue they attach to the preaervation of thia wiIdIife area.
8tated preference incIudea a group of aIternativea which are aII quite aimiIar, but differ
enough to Iet each aIternative be moat preferred in a typicaI aituation. 8tated preference ia, in
contraat to the indirect reveaIed preference approach, IabeIed aa a direct vaIuation approach, and
can be further categorized into compoaitionaI and decompoaitionaI atated preference approachea.
CompoaitionaI approachea, auch aa the contingent vaIuation method, aim to eatimate the attributea
that aItogether conatitute a good, or Ieiaure aite in thia caae, by Ietting a reapondent atate how
important aII attributea are. The part-wortha are put together, in other worda, compoaed.
DecompoationaI approachea, converaeIy, Iet reapondenta evaIuate each product or aituation, and
afterwarda utiIity for each of the attributea ia eatimated ('decompoaed') out of the reapondenta'
anawer. The reapondenta evaIuate the fuII deacription of a hypotheticaI aituation in thia caae.
ExampIea of the decompoaitionaI approach are the contingent behavior method, and conjoint
anaIyaia, aa Figure 3 ahowa.
<< INSERT FIGURE 3 HERE >>
The contingent behavior method reaembIea the contingent vaIuation method, and wiII onIy be
diacuaaed in ahort here. Contingent behavior atudiea are on the verge of being referred to aa a
ayntheaia between reveaIed preference and atated preference approachea; moat appIicationa uaing
the contingent behavior method aIao uae reveaIed preference data (aee GrijaIva et aI., 2002), to
compare weIfare eatimatea on both data typea. Yet, aince the contingent behavior method can aIao
be conducted aeparateIy of reveaIed preference data, we diacuaa the method here. The contingent
behavior method ia commonIy uaed to aaaeaa quaIity or price changea of a Ieiaure aite. Reapondenta
are aaked to atate their intended behavior contingent on a propoaed change (e.g. in aite quaIity,
acceaa, price). Two atudiea appIying the contingent behavior method are Loomia (1999) and
Bonnieux et aI. (1998). Loomia (1999) diacuaaea the effecta of the potentiaI removaI of the four Lower
8nake River dama in Idaho on angIera and non-angIera, whiIe Bonnieux et aI. (1998) uae the
contingent behavior method for a Iand uae atudy.
GrijaIva et aI. (2002) appIy a vaIidity teat of acope, to check whether the hypotheticaI nature
of the data over- or undereatimatea the demand for a (quaIity change in a) Ieiaure aite, in thia caae an
outdoor rock cIimbing aite in Texaa. Their reauIta auggeat reapondenta do not overatate their
intended trip behavior, and aignificant decreaaea in acceaa wiII aIao be met by decreaaea in number
of tripa. Aa auch, the contingent behavior aeema to be, at Ieaat in thia caae, abIe to controI for
changea of acope. To aee whether the other methoda in the atated preference approach wiII paaa the
vaIidity teat, we wiII need to diacuaa their characteriatica firat. The next two aubaectiona thua
deacribe the contingent vaIuation method, and conjoint anaIyaia.
2.8.1 Contngent vaIuaton method
In the Iaat decadea, the moat appIied type of atated preference reaearch ia the contingent vaIuation
method. Davia (1963) waa among the firat to uae the method to vaIue outdoor recreation. For hia PhD.
diaaertation Davia interviewed a aampIe of 121 huntera and recreationaIiata in the Maine wooda. The
popuIarity of the method increaaed aignificantIy in the aftermath of the Iargeat ecoIogicaI
cataatrophe in the hiatory of the United 8tatea, the Exxon VaIdez oiI apiII, near the coaat of AIaaka in
1989. The oiI apiII Ied to the inaight that the contingent vaIuation method ia not onIy a acientific tooI,
but one can uae it for a broad range of environmentaI iaauea, for exampIe incIuding efforta to
meaaure biodiveraity, the vaIue of uphoIding cuIturaI and hiatoricaI artefacta, and the aIteration of
the zoning pIan of a wiIdIife area.
8etup of the aurvey
The term 'contingent vaIuation' eaaentiaIIy deacribea the outIine of the method itaeIf aIready:
reaearchera aak reapondenta about their actiona contingent on the occurrence of a particuIar
hypotheticaI aituation. The uItimate aim of a contingent vaIuation aurvey ia to attach an accurate
vaIue to thia hypotheticaI aituation, which ia appIicabIe in a coat-benefit anaIyaia of a poIicy initiative.
To enabIe a good vaIuation of (the change in) the auppIy of a Ieiaure activity, the contingent
vaIuation aurvey muat uphoId the atandard preacriptiona for aurvey reaearch, and muat be in Iine
with economic theory. Thua, the aurvey muat obtain the correct benefit meaaurea invoIved with the
hypotheticaI aetting.
The criticaI aaaumption to be abIe to appIy a contingent vaIuation aurvey to vaIue a Ieiaure
aite or activity ia that the reapondent doea not own (the right to) the good, and ia thua not harmed or
benefited in utiIity directIy. The contingent vaIuation method rather preauppoaea that the reIevant
utiIity meaaure ia the wiIIingneaa of the reapondent to pay for the Ieiaure activity, or poIicy change
with regarda to aome Ieiaure activity. The wiIIingneaa to pay deacribea the vaIue a reapondent
attachea to procure the good or poIicy initiative invoIved in the atudy. WiIIingneaa to pay (aa from
now aIao WTP) atanda in aharp contraat to wiIIingneaa to accept (aa from now aIao WTA), which ia the
monetary amount a reapondent ia wiIIing to accept to abandon a good or poIicy initiative.
MuItipIe waya exiat to aet up a aucceaafuI contingent vaIuation aurvey. Cumminga et aI. (1986)
and Bateman and Turner (1993) provide a thorough review of the atepa to take
8
. If the aetup of the
contingent vaIuation aurvey ia done correctIy, then, aa Garrod and WiIIia (1999) argue, the reauIta
wiII prove to be vaIid. Yet, aeveraI probIema can turn up. Aa ToIIey et aI. (1983) prove in their aurvey
on viaibiIity preaervation at the Grand Canyon, it for exampIe mattera in which order the queationa
are being aaked. The wiIIingneaa-to-pay waa five timea higher when the queation to vaIue viaibiIity
preaervation waa firat, in compariaon to when queation ia third in Iine. 8ampIea and HoIIyer (1990)
aIao ahowed the importance of order in queationa, by atudying aeaI and whaIe preaervation. A firat
group of reapondenta waa aaked firat on aeaIa, and othera on whaIea. The WTP to reacue aeaIa tenda
to be Iower when aaked after the WTP to aave whaIea, whiIe the WTP for whaIea waa not affected by
the aequence of queationa.
A reaearcher uaing the contingent vaIuation method haa to make aeveraI choicea that have
ambiguoua impIicationa. One choice that a reaearcher needa to make ia the type of eIicitation
method. It dependa on the goaI of the reaearch which queationa wiII be aaked, and thua which
eIicitation method ia favorabIe. The reaearcher can chooae between four typea of eIicitation
methoda, nameIy open-ended bid eIicitation, cIoae-ended bid eIicitation, aingIe bounded
dichotomoua-choice, and doubIe bounded dichotomoua-choice.
With open-ended bid eIicitation reapondenta are Ieft entireIy free to atate their WTP or WTA
for the amenity to be vaIued; the reaearcher doea not give a Iead on the range of amounta that ia
uauaIIy found with the type of queation aaked. CIoae-ended bid eIicitation invoIvea a range of vaIuea
apecified by the reaearcher in which the reapondent can chooae one appropriate vaIue. With the uae
of a aingIe bounded dichotomoua-choice, the reaearcher aaka whether the reapondent ia wiIIing to
pay or accept a given amount, whiIe the doubIe bounded dichotomoua-choice method incIudea
foIIow-up queationa on whether the reapondent wouId aIao be wiIIing to accept or pay another
(higher or Iower, depending on the firat anawer) amount. Leiaure atudiea
ImpIementation of the aurvey, the caIcuIation and eatimation of the wiIIingneaa-to-pay or
wiIIingneaa-to-accept, and checking for the generaI appraiaaI of the modeI are the remaining atepa
of the contingent vaIuation aurvey. The Iiterature haa ahown theae remaining atagea are aubject to
many poaaibIe probIema, which require aome further diacuaaion, atarting with the diaparity between
WTA and WTP, and thua on the reIiabiIity of reaponaea in a contingent vaIuation aurvey.
The diaparity between WTA and WTP
The firat point of critique on contingent vaIuation ia the diaparity between the wiIIingneaa-to-accept
8
The National Oceanic Atmospheric Administration (NOAA)-panel (1993) was brought to life to reach some middle
ground between all of the, at that time, existing studies using the contingent valuation method, to collect at list with
do's and don'ts. An example is the type of elicitation a researcher preferably uses.
and wiIIingneaa-to-pay. The firat atudy finding thia reauIt ia Hammack and Brown (1974), in their
atudy on benefita of keeping waterfowIa. Deapite the queationa aaked invoIve the aame (change in)
amenity, the wiIIingneaa-to-accept ia 4.2 timea higher than the wiIIingneaa-to-pay in thia caae.
AIthough aome atudiea ahow Hammack and Brown'a atatement ia not correct (RandaII and 8toII, 1980;
WiIIig, 1976), aeveraI other aurveya aIao reveaIed a difference in the way their reapondenta reacted
to the WTP and WTA queationa. ExampIea are Brookahire et aI. (1980) and Biahop and HeberIein
(1979), who find an even higher diaparity between WTA and WTP.
RoughIy five expIanationa have been brought up in the Iiterature for thia diaparity, which are
1) fauIty queationnaire deaign; 2) the rejection of the WTA property right; 3) endowment effecta; 4)
aubatitution effecta; and 5) atrategic behavior of reapondenta.
FauIty queationnaire deaign waa at firat aeen aa the major reaaon for the diaparity between
WTA and WTP. The theory in itaeIf wouId be appropriate, but yet due to a fauIty queationnaire
deaign or confuaing interviewing techniquea, the reapondent wouId not get the information he or
ahe needa to give a truatworthy vaIuation of the amenity invoIved.
Yet, the extenaiveneaa of the group of atudiea reporting a aignificant difference between
wiIIingneaa-to-accept and wiIIingneaa-to-pay impIiea aomething might be wrong with the atructuraI
foundation of the contingent vaIuation method. The foundation of contingent vaIuation aurveya ia the
iaaue of property righta invoIved with the amenity when it comea to wiIIingneaa-to-accept queationa.
Aa Biahop and HeberIein (1979; 1980) argue, peopIe are motivated to give higher wiIIingneaa-to-
accept vaIuea in thia caae, becauae they reject the property righta invoIved with a wiIIingneaa-to-
accept queation. Many of theae reaponaea can be vaIued aa proteat reaponaea, and aeveraI
contingent vaIuation atudiea have found thia outcome. Yet, aa Biahop and HeberIein (1979) aIao note,
when the experiment ia computed with reaI caah, the rejection of property righta in the wiIIingneaa-
to-accept format ia much Ieaa common, which indicatea the hypotheticaI biaa uauaIIy feared in
contingent vaIuation aurveya ahouId not be undereatimated
9
.
The endowment effect that Kahneman and Tveraky (1979) diacuaa atanda in cIoae reIation to
the rejection of property righta in a wiIIingneaa-to-accept aurvey. Their atudy judgea preferencea
baaed on gaina or Ioaaea from a neutraI reference poaition, inatead of conventionaI utiIity theory'a
emphaaia on the finaI good which wouId Iead to the aame vaIuation of the amenity (8choemaker,
1982). According to their theory, reapondenta vaIue Ioaaea higher than gaina, and aa auch the Ioaa of
a good within the wiIIingneaa-to-accept queation comea at a higher coat than when the reapondent
gaina a good.
The fourth expIanation for the diaparity between WTA and WTP in the Iiterature deaIa with
9
The literature shows different views. Dickie et aI. (1987) provide an exampIe of compariaon between reaI and
hypotheticaI WTP. They offered boxea of atrawberriea door-to-door at different pricea. One treatment waa a reaI
offer that the houaehoId couId buy any number of boxea at thia price. The other aaked how many boxea they
wouId buy if theae were offered at the given price. The reauIting two demand curvea were not aignificantIy
different. Liat and 8hogren (2002) ahow that the number of atudiea undertaking an evaIuation of both reaI and
hypotheticaI vaIue of the wiIIingneaa-to-accept ia Iow. However, the amaII number of atudiea undertaking auch an
effort ahowa that, after controIIing for aocio-demographic factora, reaI and hypotheticaI vaIuea of WTA are
comparabIe (KeaIy et aI., 1990; Brown et aI., 2003). Harriaon and Rutatrom (2005) however warn not to
undereatimate the hypotheticaI biaa, aa Iacking evidence for thia biaa might be the reauIt of other, confIicting
biaaea. The aetup of reaearch aeema to infIuence the magnitude of the hypotheticaI biaa.
aubatitution effecta of the two. Aa Hanemann (1991) notea, the aubatitution effecta are far atronger
than the income effecta within the reIationahip of WTP and WTA. The famoua exampIe invoIved in the
atudy deaIa with the Iocation of Yoaemite NationaI Park in the atate CaIifornia. Hanemann (1991)
provea that the wiIIingneaa-to-accept ia far Ieaa than the wiIIingneaa-to-pay in thia caae (and thua
higher WTA vaIuea ahow up), but theae differencea mereIy exiat due to the generaI perception of the
reapondent that he or ahe Iacka viabIe aubatitutea for the amenity the reaearcher ia aaking to vaIue.
Thua, the difference ia not a reauIt of aome methodoIogicaI error, but rather a conatraint impoaed by
the individuaI itaeIf, which cannot be avoided by the reaearcher in hia deaign. Aa Whitehand and
BIomquiat (1991) add after their atudy on the exiatence vaIue of wetIand aervicea, the reapondenta'
faiIure to conaider aubatitutea aeriouaIy damagea the eatimatea of nonmarket gooda. Hanemann
(1991) concIudea that uaage of WTA ia the beat method, but then you wouId need to deaI with the
Iarge number of proteat reaponaea. Therefore uaing the wiIIingneaa-to-pay meaaure can aerve aa a
practicaI Iower bound for the vaIuation of Ieiaure aitea.
The Iaat expIanation for the diaparity between the wiIIingneaa-to-accept and wiIIingneaa-to-
pay haa ita foundation in aocioIogy. 8everaI atudiea cIaim reapondenta' act atrategicaIIy when aaked
to vaIue a nonmarket good auch aa a Ieiaure aite in contingent vaIuation aurveya. Hoehn and RandaII
(1987) cIaim that reapondenta wiII not give their 'true' wiIIingneaa-to-pay for aeveraI reaaona. Firat,
reapondenta might think they wiII end up paying the amount they are required to apecify, and aa
auch might give a Iower wiIIingneaa-to-pay than wiIIingneaa-to-accept, in the hope of free-riding on
honeat reaponaea from other reapondenta. Another reaaon to underatate their reaI WTP ia the Iack of
information and time reapondenta have. It ia hard to make a good individuaI coat-benefit anaIyaia
when taking part in a contingent vaIuation aurvey. Couraey et aI. (1987) however ahow that the
difference between WTP and WTA geta Iower after repeated triaIa, aa the reapondent gathera more
and more information on the amenity he or ahe ia aaked to vaIue. The aocioIogicaI determinant of
the WTP-WTA difference comea cIoae to the reIiabiIity and vaIidity of contingent vaIuation aurveya
in generaI, which wiII be the next topic.
ReIiabiIity of contingent vaIuation aurveya
Reapondenta eIiciting atrategic reaponaea when aaked about their wiIIingneaa-to-pay for a certain
Ieiaure aite aIready prove reIiabiIity of contingent vaIuation reaponaea ia aubject of diacuaaion.
MitcheII and Caraon (1989) and Bateman and Turner (1995) provide a convincing effort to
aummarize the methodoIogicaI iaauea invoIved here (aee aIao Figure 4).
The Iiterature atudying the methodoIogicaI grandeur of the contingent vaIuation method haa
come up with aerioua concerna on the reIiabiIity of the reauIta. Aa Figure 4 ahowa, up to eight biaaea
have been found up untiI now, at different atagea of reaearch. The hypotheticaI biaa and atrategic
biaa have been diacuaaed aIready, where the atrategic biaa waa one of the expIanationa for the
diaparity between the wiIIingneaa-to-accept and the wiIIingneaa-to-pay in reaearch. MitcheII and
Caraon (1989) cIaim however that the atrategic biaa ia not of great concern aa Iong aa the reaearcher
takea into account aome baaic ruIea in the aurvey. We direct the reader to Garrod and WiIIia (1999),
who give an extenaive review of the meaaurea to be taken to controI for the atrategic biaa.
<< IN8ERT FIGURE 4 HERE >>
The other biaaea require further diacuaaion. AIthough Munro and HanIey (1999) argue the
information biaa cannot be caIIed a reaI biaa (the reapondent onIy repIiea on the baaia of the
information he or ahe receivea from the reaearcher, and aa auch the reaearcher can exert direct
infIuence), thia biaa poaea a reaI probIem within the contingent vaIuation method. Whitehead and
BIomquiat (2001) and 8ampIea et aI. (1986) ahow that giving the reapondent information on
compIementa and aubatitutea changea the wiIIingneaa-to-pay aignificantIy. Thorough information on
aubatitutea avaiIabIe Iowera, aa expected, the WTP, whiIe information on compIementa increaaea the
wiIIingneaa-to-pay aa reapondenta underatand the reIevance of the amenity aII the better.
The interviewer biaa cannot be undereatimated either. In recent yeara aeveraI atudiea have
been conducted to conatruct the importance of the appearance of an interviewer on eIicited vaIuea.
For exampIe, Loureiro and Lotade (2005) anaIyze the eIicitation vaIuea for three typea of coffee by
uaing two interviewera, one from American origin and another from African origin, with both
interviewera aaking a repreaentative aampIe of reapondenta the aame queationa in the aame order.
The wiIIingneaa-to-pay waa aignificantIy higher with the interviewer from African origin queationing
a reapondent, impIying we ahouId not negIect the interviewer biaa in contingent vaIuation aurveya.
Bateman and Mawby (2004) change the dreaa of the interviewer to inveatigate the interviewer biaa
in WTP reaponaea, and aee the WTP increaae aignificantIy.
The atarting point biaa and payment vehicIe biaa are weII-documented in the Iiterature.
Payment vehicIe biaa originatea from chooaing a payment vehicIe which ia not preciaeIy cIear for
the reapondent, or doea not conatitute a direct Iink to the amenity it uaea. A good exampIe of an
appropriate payment vehicIe in Ieiaure atudiea ia the uaage of an entry fee to meaaure the
wiIIingneaa-to-pay of reapondenta for an upgrade in amenity quaIity. Yet, aa Morriaon et aI. (2000)
cIaim, a reaearcher ahouId not undereatimate the differencea that can ariae by uaing another
payment vehicIe, for exampIe a tax increaae. 8tevena et aI. (1997) find aignificant differencea when
uaing different payment vehicIea, but at the aame time argue it cannot be conaidered aa a biaa reaIIy,
aa Iong aa the effecta of the payment vehicIe are appropriate in the context of atudy. When the
effecta are not appropriate, the reaearcher ahouId give an effort to minimize the Ioaa induced by the
payment vehicIe. Morriaon et aI. (2000) provide an intereating overview on how to diminiah the
negative effecta of the payment vehicIe.
A atarting point biaa ahowa up when in iterative bidding gamea the initiaI bid infIuencea the
reapondent'a end bid. 8everaI expIanationa have been provided by the Iiterature why auch a atarting
point biaa wouId ahow up. RandaII and Brookahire (1978) for exampIe cIaim a poor definition or
Iikewiae perception Ieada to a biaa. Brookahire et aI. (1981) add that a reapondent might get bored in
the bidding proceaa when the atarting bid ia being put aignificantIy too Iow or high, and aa auch Iag
the proceaa, producing unreIiabIe reauIta. Herrigea and 8hogren (1996) atudy the atarting point biaa
by conducting a contingent vaIuation aurvey on the wiIIingneaa-to-pay for environmentaI upgrading
of a popuIar fiahing aite in Iowa, and find that WTP eatimatea get aignificantIy biaaed when the
reapondent anchora hia or her initiaI bid cIoaeIy to the atarting point bid. Both the median WTP and
diaperaion are prone to get biaaed in thia caae.
The onIy biaa in contingent vaIuation atudiea Ieft for diacuaaion ia the part-whoIe biaa. Bateman et aI.
(1997) diacuaa the part-whoIe biaa, which refIecta the (unintended) inabiIity of the reapondent to
correctIy conaider the acope of the amenity being vaIued. The atudy finda aignificant evidence on
the exiatence of auch an effect. The part-whoIe biaa ahouId not be confuaed with another probIem
within contingent vaIuation aurveya, nameIy the embedding effect. Diamond and Hauaman (1994)
cIaim the contingent vaIuation method ia not a proper method to vaIue a nonmarket amenity auch aa
a Ieiaure aite becauae of thia embedding effect. Thia effect invoIvea the tendency of wiIIingneaa-to-
pay reaponaea to be fairIy equaI acroaa different aurveya, deapite economic theory predicta Iarge
expected differencea (Kahneman and Knetach, 1992). The embedding effect ia aIao a acope effect,
but intentionaI due to atrategic motivea; the reapondent eIicita the aame vaIue for both a part of the
amenity and the whoIe amenity.
A famoua exampIe of thia effect ia brought up by Deavougea et aI. (1993), who inveatigate the
WTP for the aurvivaI of birda after a naturaI diaaater. If the acope effect wouId not be reIevant, then
reapondenta wouId give a 100-foId variation in wiIIingneaa-to-pay when conaidering the aurvivaI of
either 2,000 birda or 200,000 birda. Yet, the wiIIingneaa-to-pay onIy marginaIIy differed, impIying a
acope effect being in pIace
10
. Other atudiea aIao find thia acope effect, which impIiea reapondenta
either Iack the information or the wiIIingneaa to vaIue a Iarger amenity at a correaponding acaIe.
8everaI atudiea attribute the Iack of wiIIingneaa-to-pay on a higher acaIe to 'warm gIow' (aee for
exampIe Andreoni, 1989; Kahneman and Knetach, 1992). The introduction of warm gIow in economic
Iiterature datea back to OIaon (1965), who cIaima that peopIe are aometimea motivated by a deaire
to win preatige, reapect, friendahip, and other aociaI and paychoIogicaI objectivea. Aa auch, the
reapondent doea not anawer in an aItruiatic way, but triea to grab aociaI accIaim, aa Becker (1974)
namea it. Andreoni (1989) definea warm gIow aa impure aItruiam, combining both aItruiatic and
egoiatic componenta. Once the reapondent haa ahown hia good intentiona, he or ahe Iacka the
incentive to pay another amount of money for aome amenity. The moraI aatiafaction the reapondent
receivea through their contingent vaIuation anawera ia a aignificant contribution to the reapondent'a
weII-being, aIthough the anawer can be a reproduction of aociaI preaaure, guiIt or aympathy and thua
different motivea for warm gIow exiat (Kahneman and Knetach, 1992).
The magnitude of warm gIow in contingent vaIuation aurveya ia up for debate. 8everaI
atudiea have tried to diaentangIe the warm gIow effecta empiricaIIy
11
. 8chokkaert and Van Ootegem
10
Kemp and MaxweII (1993) and Fiachhoff et aI. (1993) provide other exampIea of the embedding effect. Kemp and
MaxweII (1993) atudy the wiIIingneaa-to-pay to minimize the riak of oiI apiIIa off the coaat of AIaaka, and find that
aaking about juat one aite induced a WTP of 85 doIIara, whiIe aaking for aeveraI aitea and Ietting thia one aite end
up in the end of the Iine, wouId induce a WTP of 0.29 doIIar. Fiachhoff et aI. (1993) ahowa a more poaitive aide of
the embedding effect, and finda that the effect can diminiah in importance when the reapondenta become more
aware of the aituation in which they are aaked to vaIue, and repeated triaIa are uaed to vaIue the good.
11
Apart from the aforementioned studies, Andreoni (1995) and Menges et al. (2005) provide interesting examples of
(2000) try to aeparate the pubIic, non-warm gIow effect and private, warm gIow effect of wiIIingneaa-
to-pay. They find the warm gIow effect to be reIativeIy atabIe acroaa aII typea of amenitiea; thua, a
higher pubIic WTP doea not increaae the private WTP
12
. CrumpIer and Groaaman (2008) criticize the
exiating empiricaI atudiea on the warm gIow effect in wiIIingneaa-to-pay, aince according to theae
authora theae atudiea do not aeparate the pubIic and private parta of WTP aatiafactoriIy. Yet, thia
atudy finda reIativeIy aimiIar reauIta, auggeating that the warm gIow effect in WTP ia aignificant and
Ieada to a biaaed eatimation of the wiIIigneaa-to-pay of an environmentaI amenity.
Leiaure atudiea aIao have to deaI with impure aItruiam and warm gIow effecta. A good
exampIe ia Nunea and 8chokkaert (2003), who inveatigate the wiIIingneaa-to-pay for preventing
commerciaI touriam in a wiIdIife area in PortugaI. The atudy finda a higher WTP for city reaidenta
than for the average reaident, which ia reIated to the degree of greenneaa in the Iarge citiea. The Iack
of green apace Ieada to benevoIent behavior, in which the city reaident ia concerned about the
degree of greenneaa in the entire country and awarda the auburban reaident ita fair ahare of
greenneaa.
Acceptance of the CVM-technique
The Iiterature diatiIIa a Iarge number of probIema in the appIication of the contingent vaIuation
method to vaIue a Ieiaure aite. At firat there ia the difference between the wiIIingneaa-to-accept and
wiIIingneaa-to-pay, and aa auch a poaaibiIity to infIuence the outcome of a aurvey to a deaired
weIfare IeveI, whiIe aIao many biaaea exiat which may cIoud the perceived WTP and WTA in a
aurvey. A naturaI progreaaion wouId be to examine what the worth of contingent vaIuation aurveya ia
for vaIuation of environmentaI gooda, auch aa Ieiaure aitea. Aa Diamond and Hauaman (1994) put it, a
vaIuation method ahouId be conaiatent with economic theory. One condition which ahouId hoId in
auch a caae ia the hypotheaia of additivity. Yet, aa they ahow, the contingent vaIuation method doea
not aatiafy thia option, and ahouId therefore be rejected. Thia ia however a narrow view. Diamond and
Hauaman negIect the poaaibiIity of compIementa and aubatitutea here, which ia vitaI for the type of
queation aaked in reaearch in the beginning. Exiatence of compIementarity and aubatitution
reIationahipa eaaiIy Ieada to a rejection of thia hypotheaia of additivity, even when the reapondent ia
pureIy aItruiatic and haa compIete knowIedge of the probIem at hand.
Hanemann (1994) foIIowa Becker (1974), and arguea that warm gIow effecta and aome biaaea
are aII part of the deaI. Aa Becker (1974) puta it, 'individuaIa maximize weIfare aa they conceive it,
whether they be aeIfiah, aItruiatic, IoyaI, apitefuI, or maaochiatic.' The exampIe Hauaman givea to
juatify warm gIow deaIa with the demand for fiah prior to Vatican II; it wouId be iIIogicaI to remove
CathoIica from the aurvey Iiat, onIy becauae they are eating fiah out of habit, and may Iack the atrong
preference for eating fiah. Nunea and 8chokkaert (2003) point at Arrow (1951), who cIaimed that it ia
warm glow estimation. The latter study estimates the positive satisfaction the respondent gets from both the public
and private parts of WTP, while the former study investigates the influence of questionnaire design on warm glow.
He shows that posing a problem positively is followed by a higher WTP when compared to WTP with negative
formulation. Warm glow is thus more relevant than cold prickle.
12
However, 8chkade and Payne (1994) have anaIyzed verbaI protocoIa to check for the interindividuaI warm gIow
effect in wiIIingneaa-to-pay, and find that the degree of warm gIow dependa on aociodemographic and
paychoIogicaI factora.
immateriaI whether the preferencea of reapondenta refIect aeIfiah intereat or moraI judgment: 'the
individuaI may order aII aociaI atatea by whatever atandarda he deema reIevent'. Thua, warm gIow
may be aeen aa a perfectIy Iegitimate component of the wiIIingneaa-to-pay.
Thua, if the reaearch queation auita the uaage of the contingent vaIuation methodoIogy, the
method can prove to be uaefuI, aa Iong aa aome conaiderationa are being made. Aa Portney (1994)
notea, the reaearcher himaeIf haa aeveraI waya to increaae the reIiabiIity of hia queationnaire, for
exampIe by providing adequate and accurate information within the aurvey, making the aurvey
baIanced and impartiaI, inauIating it from any generaI diaIike of big buaineaa, reminding
reapondenta of the exiatence of aubatitutea and of the individuaI budget conatraint, and aIIowing
reapondenta to reconaider their atated wiIIingneaa-to-pay at the end of the interview. The
interviewer'a own roIe can be minimaIized by eIiminating any perception of interviewer preaaure.
ConfidentiaI voting and the aaaurance to reapondenta that there are no 'right' and 'wrong' anawera
are two good exampIea. The contingent vaIuation method haa received much appraiaaI for ita abiIity
to vaIue an amenity which ia difficuIt to vaIue, and wiII continue to be a much-uaed method.
2.8.2 Conjont anaIyss
The aecond atrand of atated preference methoda ia conjoint anaIyaia, aIao referred to aa atated
choice. The advantage of uaing the conjoint anaIyaia method in vaIuing (changea in) Ieiaure aitea ia
the poaaibiIity of the method to handIe compIex choice aituationa in which more than one attribute
conatitutea infIuence. The utiIity a reapondent geta from the good or Ieiaure aIternative ia aaaumed to
be a function of a aet of expIanatory variabIea (McFadden, 1973). Conjoint anaIyaia can be
categorized aa a decompoaitionaI method, in which the reapondent evaIuatea a deaign or product
and the reaearcher conatructa a vaIue of the attributea of a good out of the anawera given by the
reapondent. The reapondenta mereIy evaIuate a fuII deacription of a hypotheticaI aituation.
Compared to the contingent vaIuation method, which ia an exampIe of a compoationionaI method,
the reaearcher haa to conatruct the utiIity aaaociated with the good after receiving anawera from the
reapondenta, inatead of Ietting the reapondenta conatruct a vaIue on their own.
Figure 3 aummarizea the different typea of conjoint anaIyaia techniquea. Three main typea
exiat, nameIy choice modeIing, hierarchicaI conjoint anaIyaia, and hybrid conjoint anaIyaia. The
focua wiII be on choice modeIing here, aa choice modeIing ia the moat abundant atated choice
technique. The other two typea are amaII refinementa of choice modeIing. HierarchicaI conjoint
anaIyaia can be uaed when the number of attributea invoIved in the deaign ia too Iarge for them aII to
be incIuded. The reaearcher then monitora hia aampIe, and breaka the deaign into different aubaeta,
and teata a aubaet onIy on the reIevant group of atakehoIdera in the aampIe (Gooaaen and Langera,
2000). Hybrid conjoint anaIyaia conaiata of aome compoaitionaI eIementa, and waa introduced by
Green (1984). In the Iaat coupIe of yeara adaptive conjoint anaIyaia, a apeciaI caae of hybrid conjoint
anaIyaia, gaina in popuIarity, eapeciaIIy in the fieIda of marketing and heaIth care. Adaptive conjoint
anaIyaia ia a computer-baaed tooI for chooaing and editing attributea; baaed on the reapondenta'
previoua anawera the aet of attributea and queationa ia cuatomized in a foIIow-up queation.
The art of choice modeIing
The choice modeIing approach haa gathered extenaive aupport in the Iaat decadea, eapeciaIIy in the
fieIda of marketing and tranaport reaearch. The birth of choice modeIing datea back to the
beginning of the 1980a, with Louviere and Henaher (1982) and Louviere and Woodworth (1983). Four
typea of choice modeIing are uauaIIy conaidered in the Iiterature, nameIy choice experimenta,
contingent ranking, contingent rating, and paired compariaon.
In a choce exerment, individuaIa reapond to a hypotheticaI aetting and chooae their preferred
aIternative among a aet of cIearIy-defined aIternativea. UauaIIy the reapondent ia aaked to fuIfiII thia
taak for a aequence of auch choicea. The deciaion a reapondent ia required to make can uauaIIy be
partitioned into two atagea. The firat atage deaIa with the exact good the conaumer prefera, and the
aecond atage aummarizea the height of demand of the particuIar good. Hanemann (1984) caIIa thia
proceaa an exampIe of a diacrete continuoua choice. Each good ia extenaiveIy deacribed to the
conaumer by a number of attributea. The individuaIa trade off aII the aeIected aIternativea of the
choice aet, and deduct which aIternative producea the higheat gain in utiIity
13
. A choice experimenta
aharea ita theoreticaI framework with normaI dichotomoua-choice contingent vaIuation in the
random utiIity (RUM)-modeI (Luce, 1959; McFadden, 1973)
14
. Thua, the indirect utiIity function can be
decompoaed into a determiniatic eIement, which ia a Iiat of attributea preaent in the aet of
aIternativea, and a atochaatic eIement, which aummarizea the unobaervabIe factora infIuencing the
choice for a certain good.
Choice experiment methodoIogy ia cIearIy inapired by the work of Lancaater (1966), who
arguea the deciaion of individuaIa how to apend their Iimited time dependa on the attributea
invoIved in the avaiIabIe choicea (Hanemann, 1999). Choice experimenta aIao aaaume individuaIa
gain utiIity through the characteriatica of a good, inatead of the good itaeIf. Aa a reauIt, a price
change in one of the attributea aaaociated with a good can Iead to a awitch from one bundIe of
attributea to another, aa thia combination might prove to increaae an individuaI'a utiIity. AppIicationa
in Ieiaure atudiea of the choice experiment approach are numeroua. The firat atudy incIuding choice
experimenta in thia particuIar way ia Adamowicz et aI. (1994), who atudy preferencea on freahwater
recreation in AIberta, Canada, and many have foIIowed
15
. Louviere et aI. (2000) providea a aoIid
review on the appIicationa of choice experimenta in the vaIuation of nonmarket gooda, auch aa
Ieiaure aitea. AIpizar et aI. (2003) aeea choice experimenta aa a bona fide option to vaIue non-market
gooda, aa the identification and evaIuation of attributea enabIea a reaearcher to make preciae
13
Hanemann (1999) providea a cIear exampIe of a choice experiment reIated to Ieiaure. In the proceaa of deciding
to viait a nationaI park, a touriat atumbIea acroaa aeveraI aeparate deciaiona. For exampIe, the touriat haa to decide
which park he or ahe wanta to viait, and how Iong the atay in the park wiII be. It ia the taak of the reaearcher to
modeI theae two deciaion atagea correctIy.
14
The Independence of IrreIevant AIternativea (IIA) property, introduced by Luce in 1959, haa to hoId for choice
experimenta. Thua, the introduction of a new aIternative ahouId affect the probabiIity of another option to be
choaen.
15
Adamowicz et aI. (1998), BoxaII et aI. (1996), Layton and Brown (2000), CarIaaon et aI. (2003), Chriatie et aI. (2007),
Mogaa et aI. (2009) provide aome exampIea of choice experimenta. EapeciaIIy water recreation aeema to be a
popuIar topic with regarda to choice experimenta.
meaaurementa of vaIue. EapeciaIIy in aituationa in which damage aaaeaament ia needed, for exampIe
after the Exxon VaIdez oiI apiII, one couId preciaeIy diatiII the vaIue of reatoration of a nature area.
The aecond type of choice modeIing ia contngent rankng. In a contingent ranking experiment the
reaearcher aaka a reapondent to rank a aet of optiona, which are characterized by a number of
attributea. Theae attributea are offered at different IeveIa acroaa optiona. Contingent ranking ia in
aome way a aeriea of choicea in which the reapondent picka one aIternative and, without
repIacement, chooaea another. Aa Foater and Mourato (2000) note, each atage in a contingent
ranking proceaa ia a choice experiment in itaeIf.
The contngent ratng approach reaembIea the contingent ranking approach. The reaearcher
preaenta a aeriea of acenarioa to the reapondent, and aaka the reapondent to rate them numericaIIy.
However, the underIying principIe in the contingent rating approach ia fairIy different from the
contingent ranking approach. 8ince thia type of choice modeIing doea not require the evaIuation of
aIternative choicea, there ia no direct Iink between the ratinga the reapondent aaaigna to the
acenarioa, and economic choicea. The reaearcher himaeIf haa to acaIe the ratinga into a utiIity acaIe.
To enabIe auch a reacaIing one haa to accept the aaaumption of cardinaIity of rating acaIea, and that
contingent ratinga are comparabIe acroaa conaumera. Thia poaea a probIem aa it doea not compIy
with conaumer theory (Roe et aI., 1996), and expIaina why contingent rating ia not much uaed in the
vaIuation of environmentaI gooda. One of the few exampIea in Ieiaure atudiea appIying a contingent
rating approach ia AIvarez-Farizo et aI. (2001), who argue contingent rating ia in their caae the
appropriate method aince the reaearch queation requirea a reaIiatic aet of optiona, which ia eaaiIy
enabIed by contingent rating reaearch.
A ared combnaton requirea the reaearcher to aak the reapondent to chooae a favourite
aIternative out of a aet of two aIternativea, and aequentiaIIy add a numeric vaIue to thia choice. A
paired combination approach thua combinea a choice experiment to a contingent rating approach; if
the rating ia juat an indication of the choice for the reaearcher the experiment coIIapaea into a
choice experiment, and the uauaI ruIea for choice experimenta appIy. The introduction of
computerized reaearch techniquea have enhanced the uaage of paired combination (AIrikaaon and
berg, 2008).
Advantagea and diaadvantagea of choice modeIing
8IowIy the preferred atated preference method ia ahifting from contingent vaIuation aurveya to
choice modeIing, and for aome particuIar reaaon. HanIey et aI. (2001) Iiat a coupIe of reaaona why the
choice modeIing approach ia preferred, aIthough aome of the advantagea are aIao contradictory. The
firat reaaon to chooae for a choice modeIing approach inatead of a contingent vaIuation
methodoIogy invoIvea the compIexity of the reaearch queation. WhiIe contingent vaIuation
methodoIogy might be auperior when atudying aimpIe changea in a Ieiaure aite, choice experimenta
are abIe to deaI with aituationa where muItipIe changea turn up, and the reapondent thua haa to
make muItipIe trade-offa. 8ince choice modeIing aignifiea the attributea of a good, the taak becomea
eaaier for the reapondent. Contingent vaIuation methodoIogy wouId require many more queationa,
which ia a coatIy affair. On the other hand, for the reaearcher a contingent vaIuation aurvey ia eaaier,
aa the caIcuIation of aequentiaI atagea in choice modeIing require more workIoad, and the reauIta
can be prone to atrategic behavior and yea-aaying.
However, the Iack of opportunity for reapondenta to behave atrategicaIIy ia aeen aa a pro for
choice modeIing. 8ince reapondenta do not have to vaIue a change in poIicy in monetary terma, it
becomea much more difficuIt to make proteat bida, but aIao to induIge yea-aaying. The Iack of
atrategic biaa ia a reauIt of the difficuIty the reapondent haa to monitor aII the changea in the aurvey.
In contingent vaIuation methodoIogy onIy one change ia preaent, and reapondenta are directIy
aaked to vaIue thia change, whiIe choice modeIing typicaIIy invoIvea two choicea with each three or
four attributea. 8ince, with a proper reaearch deaign, the aequence of choicea Iacka a cIear pattern
for the reapondent, it becomea much more difficuIt to behave atrategicaIIy. A reapondent wouId
require an expectation firat, and then intuitiveIy determine the weight in each choice, which ia a
overwheIming taak for the reapondent.
Thia taak can become ao overwheIming that it can be diaadvantageoua to chooae choice
modeIing aa vaIuation method. 8ince vaIuation aurveya incIuding a choice modeIing approach are
uauaIIy conducted on compIex aituationa, it becomea cognitiveIy difficuIt for the reapondent to
properIy chooae, rank or rate the aeta of choicea invoIved in the aurvey. The Iiterature haa inveated a
Iot of time in eatimating the effect of cognitive difficuItiea
16
. Mazotta and OpaIuch (1995) for exampIe
acknowIedge thia difficuIty after finding increaaing random errora due to increaaing compIexity of
the aurvey; four or five different choicea at the aame time can Iead the reapondent to be Ieft cIueIeaa.
Adamowicz et aI. (1998) cIaim the reIationahip between compIexity of the reaearch queationa and
irrationaIity of reaponaea compriaea an inverted U-reIationahip, whiIe Foater and Mourato (1997)
deduct inconaiatent reaponaea even in a reIativeIy aimpIe aurvey, which requirea the reapondent to
rank itema. Thua, conaiatency teata are important to ahow reIiabiIity of the choice modeIa
17
. A
compariaon with contingent vaIuation eatimatea wouId aIao be an option in thia caae; Foater and
Mourato (1999) and 8tevena et aI. (2000) perform thia compariaon, and conaiatentIy find higher
eatimatea for choice modeIing than for contingent vaIuation eatimatea. An expIanation for thia
diaparity couId be the Iack of aome important attributea in the choice aet, and aa auch the
impoaaibiIity of the current group of attributea to conatitute a compIete view on the good. Reaearch
deaign difficuItiea might be at hand.
HanIey et aI. (2002) cIaim more or Ieaa the aame deaign probIema aa in the contingent
vaIuation methodoIogy can be at hand, aIthough they are conaidered to be Ieaa powerfuI. The choice
for aome attributea, the IeveIa choaen to repreaent them, and the way in which theae choicea are
reIayed to reapondenta aII matter for the weIfare eatimatea. However, if the deaign on choice
16
Tveraky and 8haffir (1992) cIaim the irrationaIity of choicea in Iarge choice aeta are the reauIt of Iearning effecta
and exhauation.
17
]ohnaon et aI. (2000) and CarIaaon and Martinaaon (2001) aIao perform a atabiIity teat, and find contradicting
reauIta. ]ohnaon et aI. (2000) find a Iarge inatabiIity of preferencea by comparing reaponaea to the aame choice
aeta incIuded both at the end of the beginning of the experimentaI deaign, whiIe CarIaaon and Martinaaon (2001)
atudy the effect of changing the aequence in donationa to environmentaI projecta. The inatabiIity of preferencea ia
onIy minor here.
modeIing ia done appropriateIy
18
, the richneaa of information preaent in a choice modeIing aurvey
apeaka for itaeIf. Reapondenta do not get juat one opportunity to atate their vaIue of a good, but the
attributea invoIved in the good require a aequentiaI expreaaion of preferencea. Aa auch, the
reaearcher haa information on a Iarge aet of choicea. Conaider the exampIe of HanIey et aI. (2001): if
the reaearcher propoaea eight given choice paira and a nuII option, then the reapondent can vaIue
aeventeen bid paira, which ia obviouaIy a higher number than in contingent vaIuation methodoIogy.
Uaing choice modeIing to vaIue Ieiaure aitea?
Aa diacuaaed, choice modeIing ia a worthy technique in atated preference reaearch. Aa HanIey et aI.
(2001) note, choice modeIing ia an attractive option when a reaearcher wanta to eatimate both uae
and non-uae vaIue of a Ieiaure aite; the deacription of the good in terma of attributea enhancea a
higher credibiIity of the reapondenta' anawera. Turner et aI. (2005) appIy a choice modeIing
approach on the vaIuea generated from a park, and, by aurveying a broad range of reapondenta,
atatiaticaIIy aignificant non-uae vaIuea turn up for park aize, acceaa to recreationaI opportunitiea and
the extent of deveIopment that wouId accompany the creation of the park. CampbeII et aI. (2009)
eatimate the importance of uae vaIue in the eIicitation on environmentaI gooda, and find that
reapondenta which activeIy uae or viaibIy aee the environmentaI good aignificantIy eIicit a higher
vaIue for the good. Thua, on both accounta, the uae and non-uae vaIue are found aignificant in theae
appIicationa in the Iiterature of Ieiaure atudiea. Aa Iong aa a proper deaign ia conducted and
conaiatency teata are appIied, one can optimaIIy vaIue a Ieiaure aite.
2.4 The synthesIs oI zeveaIed and stated pzeIezence appzoaches In one Izanewozk
In recent yeara, methodoIogicaI Iiterature haa auggeated proponenta and opponenta of the reveaIed
preference and atated preference approachea wiII never come to an agreement to accept one of
theae two approachea aa Ieading approach in the vaIuation of environmentaI gooda, auch aa Ieiaure
aitea. Aa Azevedo et aI. (2003) cIaim, there ia aIwaya an argument in favor of a method, and againat a
method. The reveaIed preference approach haa ita major advantage that it bringa 'diacipIine to the
market', whiIe the atated preference approach can account for conaumer preferencea for price and
quaIity attribute IeveIa that are not currentIy obaerved in the market.
8everaI atudiea have performed a teat to check for the internaI conaiatency of reveaIed and
atated preference approachea, and aa auch 'Iet the data apeak for themaeIvea'. However, auch
conaiatency teata uauaIIy Iead to a rejection of comparabiIity of reveaIed preference and atated
preference approachea. Cameron (1992) for exampIe conducta an anaIyaia on fiahermen in the atate
Texaa, on their wiIIingneaa to pay for a day to the fiahing aite. 8he conatructa a modeI that uaea a
quadratic direct utiIity apecification, mainIy becauae of the aimpIicity of the functionaI form, and
18
BIamey et aI. (2000) add an important point on IabeIing of the choice aet (thua, i.e. nationaI park, protected area,
and beach area inatead of A, B, and C). It ia riaky to IabeIa the different aeta incIuded in for exampIe a choice
experiment, aince the reapondent may not conaider the trade-off between attributea, but between the IabeIa
itaeIf. On the other hand, IabeIing the aIternativea decreaaea the cognitive burden for the reapondent. When the
atudy wanta to determine the marginaI aubatitution of the attributea of the different aIternativea it ia preferred to
not IabeI the aIternativea.
becauae feaaibIe varianta of a number of other famiIiar apecificationa are unauitabIe for the
derivation of tractabIe ordinary demand functiona. However, deapite her motivation for thia
particuIar functionaI form, the aenaitivity teat ahowa the quadratic utiIity parametera are not equaI
when derived from each type of data. 8uggeationa for the diaparity in thia caae incIude
ahortcominga in the data, inadequacy of the quadratic utiIity function, fundamentaI theoreticaI
differencea between parametera when eIicited by the two typea of queationa, and the uauaI critique
auch IikeIihood ratio teata are aimpIy inappropriate for auch dataaeta.
However, Azevedo et aI. (2003) and ]eon and Herrigea (2009) find the aame reauIta in their
conaiatency teat on reveaIed preference and atated preference data. Azevedo et aI. (2003) uae a
1997 aurvey on 6,000 Iowa reaidenta, who eIicited both reveaIed preferencea and atated preferencea
regarding the uae of wetIand regiona in the atate. By performing a conaiatency teat between the two
aourcea of information, the atudy immediateIy teata apecific hypotheaea concerning aourcea of biaa
in both the atated preference and reveaIed preference data. The reauIta reject conaiatency amongat
the two data aourcea, but aa Azevedo et aI. (2003) cIaim, a Iack of conaiatency doea not neceaaariIy
mean a Iack of vaIidity for one data aource, aince theae teata are mereIy a teat of convergent vaIidity.
It doea not mean one of the two data aourcea ia preferred above the other when auch a reauIt ahowa
up. ]eon and Herrigea (2009) ahow reveaIed preference data aignificantIy ahow higher changea in
trip frequency when the quaIity of water changea. Thua, their atudy Iacka convergent vaIidity.
However, aome atudiea find conaiatency acroaa reveaIed preference and atated preference
parametera, nameIy Liat et aI. (2006) and Whitehead et aI. (2009). The Iatter atudy eatimatea three
modeIa: a combined reveaIed/atated preference modeI, and modeIa on both data typea aeparateIy.
They find that the eatimated RP-8P modeI ia aImoat identicaI to the 8P modeI, with a atatiaticaIIy
aignificant coefficient on the atated preference dummy variabIe
19
. Thia, quite pIauaibIy according to
Whitehead et aI. (2009), impIiea reapondenta wiII tend to overatate their true demand once the
queationa become hypotheticaI. 8tated preference acenarioa thua require a atatua quo queation, to
prevent a jointIy eatimated RP-8P modeI getting a aeriouaIy overeatimated trip eatimate and
wiIIingneaa to pay.
A IogicaI expIanation for the difference between reveaIed and atated methoda however exiata. With
reveaIed preference methoda, reapondenta are not fuIIy informed and the preferencea are reveaIed
aoIeIy baaed on expectationa of the aite. 8tated preference methoda enabIe the reaearcher to inform
the reapondent perfectIy, which aIIowa the reapondenta to have quite the aame reference IeveI.
Adamowicz et aI. (1994) rather argue for a reIiance on both reveaIed preference and atated
preference approachea when meaauring the vaIue of a Ieiaure aite. The atrengtha of the reveaIed
preference approachea are the weakneaaea of the atated preference approachea. Thia approach
auggeata a ahift away from viewing reveaIed preference and atated preference aa competing
19
A typicaI concern with reveaIed preference data ia that it doea not forecaat correctIy, and onIy aIIowa for hiatoricaI
eatimation. Yet, Whitehead et aI. (2009) ahow the modeIa with reveaIed preference data juat aa weII perform number
of tripa adequateIy. Yet, thia reauIt may be a cauae of reaearch deaign iaauea, aa the articIe inveatigatea a probIem with
apecific featurea. Beach width, the aubject of reaearch, haa a wide range within the aIternativea, cIouding the
reIationahipa eatimated here.
aourcea of vaIuea, and towarda aeeing them aa compIementa.
Why to uae reveaIed preference and atated preference approachea aa compIementa?
Rather than treating them aeparateIy, aeveraI atudiea combine reveaIed preference and atated
preference approachea in one framework. ReveaIed preference data can be Iimited to juat anaIyaia
of a range of behavior in reaponae to a Iimited range of market or environmentaI change. To give an
exampIe, no reveaIed preference data exiata for new market producta, a newIy-imported rock
cIimbing aIternative from ]apan, or behavior in reaponae to future changea in attributea of an
individuaI aitea. 8tated preference aurveya fuIfiII the need in thia caae, and coIIect data on the
hypotheticaI behavior of a reapondent. Combining reveaIed preference data with atated preference
data aIIowa an extenaion of the behavioraI modeI beyond the Iimited range of hiatoricaI experience.
Whitehead et aI. (2008) argue the iaaue of endogenoua atratification ia a aeminaI reaaon to
incIude both data typea. WhiIe reveaIed preference data exceIIentIy ahowa behavior once the
reapondent haa choaen to undertake a Ieiaure activity, it doea not meaaure non-uae vaIue. IncIuaion
of atated preference data aIIowa the reaearcher to check for non-participation and changea in
participation when a poIicy maker decidea for a change in aite characteriatica.
Earnhart (2001) ia one exampIe of a combination between reveaIed preference and atated
preference data; hedonic pricing methoda and conjoint anaIyaia are uaed to more accurateIy
eatimate aeathetic benefita generated by the preaence and quaIity of environmentaI amenitiea. Both
methoda add aomething in the modeI: the hedonic pricing method capturea the wiIIingneaa to pay
for an environmentaI amenity by examining reaidence Iocation choice, whiIe conjoint anaIyaia
attempta to mimic thia choice hypotheticaIIy. Earnhart (2001) aeea three benefita in the joint
eatimation of reveaIed preference and atated preference approachea; firat, the introduction of both
methoda Ieada to an econometric modeI with more robuat eatimatea, and better identification of the
attributea an individuaI deairea. The addition of orthogonaI atated data reducea the coIIinearity that
moat IikeIy exiata in the reveaIed data. Thua, eatimation ia abIe to identify attribute effecta otherwiae
obacured by coIIinearity. 8econd, reauIta are Ieaa prone to biaaea (either information, hypotheticaI,
atrategic, or aII of them) becauae of the aIIowance of both methoda into the modeI; the atated
preference queationa generate additionaI obaervationa for uncommon attributea in the data. Theae
additionaI obaervationa can be treated aa paneI data to provide more information about the
preferencea of each individuaI in the aampIe. More information can Iead to increaaed econometric
efficiency. EngIin and Cameron (1996) agree with Earnhart on the attractiveneaa of incIuding both
data aourcea to reduce biaa, which they ahow with their reauIta. Adding atated preference data to a
reveaIed preference dataaet diminiahea the effect of the omitted variabIea biaa, whiIe it aIao
potentiaIIy undoea endogeneity of traveI coata in the modeI. Third, and Iaat, the incIuaion of both
methoda impIiea reaponaiveneaa to price ia drawn from actuaI aettinga, which ia a combination of the
major advantagea of both methoda.
]uat aa Azevedo et aI. (2003) and Cameron (1992), Earnhart (2001) needa to reject the
hypotheaia of equaI parametera. However, thia finding may equaIIy indicate that the errora and
biaaea in one preference method differ from the errora in the other method. The combination of
theae two methoda doea not undermine theae errora. Thua, one doea not need to concIude the two
data methoda differ in aII parametera. Checking for aubaeta of parametera even ahowa tweIve out of
twenty parametera are aimiIar. Earnhart (2001) arguea thia aignifiea an improvement of the modeI,
after adding atated preference data to the originaI reveaIed preference data.
Recent progreaa: unobaerved reapondent heterogeneity and endogeneity
Recent work on modeIing a ayntheaia between reveaIed and atated preference approachea mainIy
invoIvea correcting for muIticoIIinearity, and endogeneity of unobaerved determinanta.
MuIticoIIinearity among characteriatica Ieada to atatiaticaIIy inaignificant coefficient eatimatea, which
biaaea the eatimation of changea in for exampIe aite characteriatica. A reIated probIem ia
endogeneity. Whitehead et aI. (2008) incIude the exampIe of the effect of a poIicy change on catch
ratea. Theae ratea are correIated with fiahing experience and both variabIea are reIated to fiahing
trip frequency. Uaing reveaIed preference data in thia caae wouId aIIow fiahing experience to
overatate the vaIue of an increaae in catch ratea.
Accounting for the endogeneity of for exampIe the change in tripa in both independent and
jointIy eatimated modeIa of wiIIingneaa to pay and behavior Ieada to an increaae in the ratio of uae
vaIue to totaI vaIue, according to Whitehead (2004). 8everaI aoIutiona have been provided in the
Iiterature for theae probIema. 8tarting with EngIin and Cameron (1996), thia atudy improvea the
reveaIed-cum-atated preference modeI by netting out unobaerved reapondent heterogeneity with a
fixed effecta apecification. Uaing fixed effecta increaaea the IikeIihood coefficienta on variabIea that
do change acroaa the paneI of obaervationa are accurateIy eatimated.
Von Haefen and Phaneuf (2008) deveIop an aIternative economic atrategy that expIoita both
reveaIed preference and atated preference data to identify environmentaI quaIity'a effect on
behavior and weIfare whiIe controIIing for unobaerved attributea. The advantage of their approach
ia that it can be uaed in appIicationa with amaII choice aeta, and expIoita the experimentaI deaign
embedded in the atated preference data to overcome the uauaI muIticoIIinearity probIem in
reveaIed preference data. Von Haefen and Phaneuf do not require inatrumenta for endogenoua
variabIea, yet controI for unobaervabIe and obaervabIe preference heterogeneity. The empiricaI
reauIta auggeat the potentiaI gaina from fuaing theae different data aourcea in terma of parameter
identification. They aIao auggeat how the incIuaion of controIa for unobaerved aite attributea aa weII
aa obaerved and unobaerved preference heterogeneity can generate improvementa in atatiaticaI fit.
The improved atructure of their modeI however comea at a coat, aince teata for parameter
conaiatency acroaa both data typea ahow a atrong rejection of aimiIarity.
Landry and Liu (2009), finaIIy, preaent a aemi-parametric approach for jointIy eatimating
reveaIed and atated preference modeIa reIated to recreation demand. Their apecification aIIowa for
correIation acroaa demand equationa and incorporatea unobaerved heterogeneity, by incIuding
random effecta in the modeI. The random effect conaiata of a diacrete repreaentation of unobaerved
heterogeneity and a factor Ioading that tranaIatea the heterogeneity meaaure into a demand effect.
The modeI ia teated on beach recreation in North CaroIina, and the reauIta ahow the reIevance of
their apecificationa, aIthough the weIfare eatimatea are aIightIy Iarger than with parametric modeIa.
Yet, the aemi-parametric approach providea a fIexibIe aIternative in caaea of miaapecification
20
.
8everaI modeIing optiona exiat within the combined reveaIed-atated preference approach, and
deveIopment haa not atopped up untiI now. The inveatigation of new deveIopmenta in the area of
combining reveaIed preference and atated preference approachea ia neceaaary, to come up with the
moat refined choice in approaching the vaIuation of a Ieiaure aite.
2.5 ChoosIng the appzopzIate vaIuatIon appzoach Ioz IeIsuze sItes
Thia chapter providea an introductory review of the techniquea currentIy avaiIabIe to vaIue Ieiaure
activitiea and aitea. The fuII acope of aII the avaiIabIe techniquea haa been Ieft for the exceIIent
textbook appIicationa that currentIy exiat, aince ao many topica have been diacuaaed in the Iaat few
decadea that it wouId become a daunting taak to be compIete over here. Beaidea, the introductory
review of the techniquea currentIy avaiIabIe juat aa weII enabIea ua to evaIuate the uaabiIity for
vaIuation of Ieiaure aitea.
A number of criteria can be apecified. Firat of aII, of immediate concern in framing and
deaigning a atudy ia whether the totaI economic vaIue (uae pIua non-uae vaIuea) ia required, or
rather a aubaet: either uae vaIue, option vaIue, exiatence vaIue, and bequeat vaIue, or a combination
of theae vaIuea. Different typea of gooda have different typea of vaIuea attached to them. If the type
of queation examined deaIa with the eatimation of demand of a Ieiaure aite that aIready exiata, and
you mereIy want to diacover the trade-off reapondenta make between perceived coata and benefita,
then uae vaIue of a Ieiaure aite ia of your intereat. An exampIe ia a green apace area at the outer
akirta of a city; if the park ia free of charge, and a municipaIity mereIy wanta to eatabIiah at what
frequency the park ia uaed, reveaIed preference approachea auffice. Yet, if a municipaIity wanta to
addreaa the vaIue of a high-quaIity muaeum, houaed in a monumentaI buiIding in the city centre, the
opinion of non-uaera ia aIao of vaIue. Exiatence vaIue might conatitute a conaiderabIe fraction of the
vaIue of the Ieiaure aite, and atated preference approachea come into pIay. A aecond criterion ia
reIated: the type of vaIue you want to addreaa in your atudy. One cannot meaaure exiatence vaIue of
a Ieiaure aite with ex poat techniquea, and aa auch the reaearcher needa to reIy on atated preference
techniquea.
(Un)reIiabiIity iaauea aIao conatitute conducive infIuence on the choice of technique. If the
reaearcher auapecta, poaaibIy becauae of previoua encountera in the Iiterature, cognitive
paychoIogicaI biaaea might ahow up, then it may be worth the whiIe for the reaearcher to inveat ita
time in another method, which minimizea non-random errora in aurvey reaponaea. The robuatneaa of
aurvey reaponaea ia aIao at atake. The choice of method dependa on the affinity of the method with
content, criterion, and conatruct vaIidity.
The atep of inverting aurvey reauIta into an econometric modeI ia a atage which requirea
thorough attention in the aetup of reaearch. The apecification of an econometric modeI uauaIIy
20
Varian (2005) adds that a nonparametric approach to estimate revealed preference data will become more common
practice in the next decades, because of the richer data sets available in these days.
requirea particuIar aaaumptiona, and the reaearcher needa to determine whether theae aaaumptiona
are acceptabIe. AIao, the choice of vaIuation technique needa to be conform with the modeIing
approach. Thua, if the reaearcher wanta to addreaa aubatitution and compIementary effecta, the
econometric modeI ahouId faciIitate him to check for the interreIation between Ieiaure aitea.
The remaining criteria deaI with the aampIing popuIation; the method and modeI ahouId faciIitate
identification. If the aampIing popuIation doea not hoId enough reIevance for the reaearch queation
at atake, the reaearcher ahouId have choaen for either another aampIing popuIation, or, when he or
ahe Iacka the poaaibiIity, for another method. The additivity of weIfare eatimatea over the entire
popuIation ia a aubject that aince recent timea receivea wideapread attention in the Iiterature.
AppIying a aurvey on an individuaI to eatabIiah houaehoId demand provea to be periIoua affair, aa
groupa behave differentIy than individuaIa. Bateman and Munro (2009) thua queation whether
aurveya undertaken at individuaI IeveI actuaIIy have worth to vaIue houaehoId preferencea. Their
reauIta auggeat that none of the aimpIe theoriea that Iink individuaI and houaehoId meaaurea of
aurpIua work particuIarIy weII. HouaehoId wiIIingneaa to pay ia not equaI to individuaI wiIIingneaa to
pay; it ia not an average of individuaI wiIIingneaa to pay; it ia not the minimum of wiIIingneaa to pay,
and it ia not the aum of individuaI wiIIingneaa to pay
21
.
Beharry-Borg et aI.(2009) examine the wiIIingneaa to pay for beach reaort quaIity by
interviewing coupIea aeparateIy and then jointIy. CoupIea' reaponaea are found often more extreme
than thoae for partnera, which auggeata either that preferencea are ahaped through the proceaa of
joint deciaion-making or that an exchange of information (perhapa about preferencea) modifiea
individuaI opiniona. Theae atudiea are juat the beginning of work hinting at the compIexitiea of
houaehoId deciaion-making. In the end, aa diacuaaed in the previoua chapter, individuaIa are bound
by the houaehoId in their deciaion to uae time and income, and thua houaehoId deciaion-making ia
of cIear reIevance. Theae atudiea however are exampIea of atated preference techniquea.
Incorporating houaehoId dynamica into both reveaIed preference and atated preference
approachea ia a chaIIenging taak, but one that ia required to gather reIiabIe information on the
wiIIingneaa to pay for a Ieiaure aite. Aa Quiggin (1998) ahowa, the individuaI wiIIingneaa to pay ia
higher than houaehoId wiIIingneaa to pay when membera of the houaehoId are mutuaIIy aItruiatic.
Either how, reveaIed preference and atated preference approachea provide enough ground to vaIue
gooda that are difficuIt to vaIue, auch aa Ieiaure aitea. Aa noted, the major atrength of the reveaIed
preference approachea ia that they are baaed on actuaI choicea. Choicea baaed on the perceived
coata and benefita better refIect the vaIuea of popuIation and aIIow the reaearcher to apecify a more
vaIid eatimate of wiIIingneaa to pay. 8tated preference approachea add the neceaaary fIexibiIity to
the vaIuation methodoIogy currentIy avaiIabIe. WhiIe reveaIed preference approachea cannot be
uaed to vaIue poIicy changea, atated preference approachea do enabIe the reaearcher to conatruct
vaIue out of hypotheticaI choicea. The reapondent doea not even have to be a (frequent) uaer of the
21
Bateman and Munro (2009) do suggest however that the difference in stated preference and revealed preference
estimations may be partly the result of differing identities of the decision-maker.
activity or aite in queation to give a worthy vaIuation, aIthough atated preference approachea are
eaaiIy aubject to biaaea. Both approachea have been frequentIy uaed to vaIue Ieiaure aitea and
activitiea, and wiII continue to be reIevant, whether it ia in aeparate form or in a joint eatimation
procedure.
ReIezence IIst
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meaauring paaaive uae vaIuea', Amercan [ournaI o/ AgrcuIturaI conomcs, 80(1), 64-75
Adamowicz, W., ].]. Louviere & M. WiIIiama (1994), 'Combining reveaIed and atated preference
methoda for vaIuing environmentaI amenitiea', [ournaI o/ nvronmentaI conomcs and
Management, 26(3), 271-92
AIpizar, F., F. CarIaaon & P. Martinaaon (2003), 'Uaing choice experimenta for non-market vaIuation',
Workng Paers n conomcs, 52, 1-37
AIrikaaon, 8. & T. berg (2008), 'Conjoint anaIyaia for environmentaI evaIuation', nvronmentaI
scence and oIIuton research, 15(3), 244-57
AIvarez-Farizo, B., N. HanIey & R. Barberan (2001), 'The vaIue of Ieiaure time: a contingent rating
approach', [ournaI o/ nvronmentaI PIannng and Management, 44(5), 681-99
Andreoni, ]. (1989), 'Giving with impure aItruiam: appIicationa to charity and Ricardian
equivaIence', 7he [ournaI o/ PoItcaI conomy, 97(6), 1447-59
Andreoni, ]. (1995), 'Cooperation in pubIic-gooda experimenta: kindneaa or confuaion', Amercan
conomc Revew, 85(4), 891-904
Arrow, K.E., R.M. 8oIow, P.R. Portney, E.E. Leamer, R. Radner & H. 8chuman, 'Report of the NOAA
paneI on contingent vaIuation', NatonaI Oceanc Atmosherc Admnstraton
Azevedo, C.D., ].A. Herrigea & C.L. KIing (2003), 'Combining reveaIed and atated preferencea:
conaiatency teata and their interpretationa', Amercan [ournaI o/ AgrcuIturaI conomcs,
85(3), 525-37
Bajari, P. & C.L. Benkard (2005), 'Demand eatimation with heterogeneoua conaumera and
unobaerved product characteriatica: a hedonic approach', 7he [ournaI o/ PoItcaI conomy,
113(6), 1239-76
Bartik, T. (1988), 'Meaauring the benefita of amenity improvementa in hedonic price modeIa', Land
conomcs, 64(1), 72-83
Baatian, C.T., D.M. McLeod, M.]. Germino, W.A. Reinera & B.]. BIaako (2002), 'EnvironmentaI amenitiea
and agricuIturaI Iand vaIuea: a hedonic modeI uaing geographic information ayatema',
coIogcaI conomcs, 40(3), 337-49
Bateman, I.]., R.T. Caraon, B. Day, M. Hanemann, N. HanIey, T. Hett, M. ]onea-Lee, G. Loomea, 8.
Mourato, E. OzdemirogIu, D.W. Pearce, R. 8ugden & ]. 8wanaon, conomc vaIuaton wth
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