Three Reasons to Use Annual Payments in Contingent Valuation Surveys: Convergent Validity, Discount Rates, and Mental Accounting
We present three arguments for using ongoing annual payments in contingent valuation (CV) surveys that estimate the benefit of a long-lasting environmental improvement. First, by matching the duration of the payments with the duration of the environmental benefits, survey respondents are spared from performing complicated present value calculations. Second, willingness to pay (WTP) estimates from CV surveys that include ongoing annual payments best match WTP estimates obtained using travel cost surveys. Third, respondents are less likely to face binding mental budget constraints with ongoing annual payments than with a larger one-time payment. In addition, respondents’ discount rates may be estimated by collecting non-hypothetical, individual time preference data as part of the valuation survey.
Corrigan, Jay R.; Egan, Kevin J.; and Dwyer, Daryl F., "Three Reasons to Use Annual Payments in Contingent Valuation Surveys: Convergent Validity, Discount Rates, and Mental Accounting" (2015). Journal of Environmental Economics and Management 72. Faculty Publications. Paper 54.
Journal of Environmental Economics and Management