Inferences from stated preference surveys when some respondents do not compare costs and benefits

Abstract

Stated preference surveys are often used to estimate willingness to pay (WTP) for environmental improvements. These surveys typically ask respondents to choose between the status quo and one or more environmental improvements at hypothetical costs. The feature of these survey data that determines the estimate of the WTP is the declining fraction of respondents who choose an environmental improvement as the hypothetical cost increases. But data alone are not enough. A formal choice model is also needed to turn these data into WTP estimates. The traditional model presumes that all respondents know the gain in utility that they would experience if the environmental improvement were enacted, and they also know how much utility would be lost if they were compelled to pay the hypothetical cost. They then are assumed to choose the option with the greatest hypothetical net benefit, or choose the status quo if all the hypothetical net benefits are negative.