¥ Contingent
valuation is enormously flexible
in that it can be used to estimate the economic value of virtually anything. However, it is best able to estimate
values for goods and services that
are easily identified and understood by
users and that are consumed in
discrete units (e.g., user days of recreation), even if there is no observable behavior available to deduce values through other means.
¥ Though the technique requires competent survey analysts to achieve defensible
estimates, the nature of CV studies
and the results of CV studies are
not difficult to analyze and describe. Dollar values can be presented in terms of a mean or median value per
capita or per household, or as an
aggregate value for the affected population.
¥ CV has been widely used, and a great deal of research is being conducted to
improve the methodology, make results more valid and reliable, and better
understand its strengths and limitations.
Issues and Limitations of the Contingent Valuation Method:
¥ Although the contingent valuation method has been widely used for the past two
decades, there is considerable controversy over whether it adequately measures
people's willingness to pay for environmental quality.
¥ People have practice making choices with market goods, so their purchasing decisions in
markets are likely to reflect
their true willingness to pay. CV
assumes that people understand the good in question and will reveal their preferences in the contingent
market just as they would in a
real market. However, most people are unfamiliar with placing dollar values on environmental goods and
services. Therefore, they may not have an adequate basis for stating their true
value.
¥ The expressed answers to a willingness to pay question in a contingent valuation
format may be biased because
the respondent is actually
answering a different question than the surveyor had intended. Rather than expressing value for the good, the
respondent might actually be
expressing their feelings about the scenario or the valuation exercise itself. For example,
respondents may express a positive willingness to pay because they feel good about the act of giving for
a social good (referred to as the Òwarm glowÓ effect), although they believe that the good itself is unimportant. Respondents may state a positive willingness to pay in order to signal that they place importance on improved environmental quality in general. Alternatively, some respondents may value the
good, but state that they are not willing to pay for it, because they are protesting some aspect of the scenario, such as increased taxes or the means of providing the good.