Non-Market Measurement Techniques of Willingness to Pay, the Case of Environmental Resources: A Review
Abstract
The objective of this study is to review measurement techniques of willingness to pay (WTP), comparison of techniques and review of empirical evidences to support the theoretical concept of willingness to pay measurement methods. Particularly, the review mainly focuses on stated preference method. To address these objectives, intensive literature review was under taken. Finally, the result of the review was presented in narration, tabular and diagrammatic form. The review indicated that the concept of WTP has been applied in different field of study to assign monetary value using observed market behavior and hypothetical market scenarios for non-marketed goods and services. There are two commonly used methods for estimating WTP into revealed and stated preference methods. Depending on the type of goods or services in question, the time and research resources available, both methods can be useful though they have their own advantages and disadvantages. Revealed preference technique is used to estimate the use value only; on the other hand, stated preference technique is applicable to estimate both use and non-use value. This indicates that stated preference technique has broader scope than revealed preference.References
Abdullah, S., Markandya, A. and Nunes, P.A. (2011). Introduction to economic valuation methods. Research tools in natural resource and environmental economics (pp. 143-187): World Scientific.
Abebe, M.B. and Geta, E. (2014). Farmers willingness to pay for irrigation water use: the case of Agarfa District, Bale Zone, Oromiya National Regional State. (M.Sc. thesis). Haramaya University, Ethiopia.
Abila, R., Diafas, I., Guthiga, P., Hatfield, R., Kiragu, S. and Ritho, C. (2005). Economic valuation and environmental assessment. Center for Development Research (ZEF) and IUCN-The World Conservation Union-Eastern Africa Regional Office (IUCN-EARO).
Abu, G., Taangahar, T. and Ekpebu, I. (2011). Proximate determinants of farmers WTP (willingness to pay) for soil management information service in Benue State, Nigeria. African Journal of Agricultural Research. 6(17): 4057-4064.
Agago, T.A., Woldie, M and Ololo, S. (2014). Willingness to join and pay for the newly proposed social health insurance among teachers in Wolaita Sodo town, South Ethiopia. Ethiopian Journal of Health Science. 24(3): 195–202.
Ahmed, S., Hoque, M. E., Sarker, A. R., Sultana, M. and Islam, Z. (2016). Willingness-to-pay for community-based health insurance among informal Workers in Urban Bangladesh. PloS one. 11(2): 1–16.
Alemayehu, B., Hagos, F., Haileslassie, A., Mapedza, E. , Awulachew, S.B. and and Tesfaye T. (2009). Prospect of payments for environmental services in the Blue Nile Basin: examples from Koga and Gumera watersheds, Ethiopia.
Amare, D. , Mekuria, W. , T/wold, T. , Belay, B. , Teshome, A. , Yitaferu, B. and Tegegn, B. (2016). Perception of local community and the willingness to pay to restore church forests: the case of Dera district, northwestern Ethiopia. Forests, Trees and Livelihoods. 25(3): 173-186.
Amfo-Otu, R., Debrah, W., Adjei, K. and Akpah-Yeboah, S. (2012). Willingness to pay for solid waste collection in semi-rural Ghana: a logit estimation. International Journal of Multidisciplinary Research. 2(7): 40-49.
Angella, N., Dick, S. and Fred, B. (2014). Willingness to pay for irrigation water and its determinants among rice farmers at Doho Rice Irrigation Scheme (DRIS) in Uganda. Journal of Development and Agricultural Economics. 6(8): 345-355.
Baker, R. and Ruting, B. (2014). Environmental policy analysis: a guide to non-market valuation: Productivity Commission.
Belete, Z. and Assefa, Y. (2003). Willingness-to-pay for protecting endangered environments: The case of Nechsar National Park.
Bishop, J.T. (1999). The economics of non-timber forest benefits. An overview: International Institute for Environment and Development.
Bogale, A. and Urgessa, B. (2012). Households' willingness to pay for improved rural water service provision: application of contingent valuation method in Eastern Ethiopia. Journal of Human Ecology. 38(2): 145-154.
Breidert, C. (2007). Estimation of willingness-to-pay: Theory, measurement and application: Springer Science & Business Media.
Breidert, C., Hahsler, M. and Reutterer, T. (2006). A review of methods for measuring willingness-to-pay. Innovative Marketing. 2(4): 8-32.
Cameron, T.A. and Quiggin, J. (1994). Estimation using contingent valuation data. Journal of Environmental Economics and Management. 27(3): 218-234.
Cho, S.-H., Newman, D.H. and Bowker, J.M. (2005). Measuring rural homeowners' willingness to pay for land conservation easements. Forest Policy and Economics. 7(5): 757-770.
Cho, S.-H., Yen, S.T., Bowker, J.M. and Newman, D.H. (2008). Modeling willingness to pay for land conservation easements: treatment of zero and protest bids and application and policy implications. Journal of Agricultural and Applied Economics. 40(01): 267-285.
Clark, M.D., Determann, D., Petrou, S., Moro, D and Bekker-Grob, E. W. (2014). Discrete choice experiments in health economics: a review of the literature. Pharmacoeconomics. 32(9): 883–902.
Coast, J., Al-Janabi, H., Sutton, E. J., Horrocks, S. A., Vosper, A. J., Swancutt, D. R and Flynn, T. N. (2012). Using qualitative methods for attribute development for discrete choice experiments: issues and recommendations. Health Economics. 21(6): 730–741.
Dlamini, C.S. (2012). Types of values and valuation methods for environmental resources: Highlights of key aspects, concepts and approaches in the economic valuation of forest goods and services. Journal of Horticulture and Forestry. 4(12): 181-189.
Ezebilo, E.E. (2010). Community-based preferences for economic incentives to promote biodiversity conservation in a tropical rainforest. International Journal of Environmental Research. 4(3): 501–506.
Freeman, A.M. (1992). The measurement of environmental and resource values. Theory and methods: resources for the future.
Gatto, P., Vidale, E., Secco, L. and Pettenella, D. (2014). Exploring the willingness to pay for forest ecosystem services by residents of the Veneto Region. Bio-based and Applied Economics. 3(1): 21.
Gebremariam, G. (2012). Households’ willingness to pay for soil conservation practices in Adwa Woreda, Ethiopia: a contingent valuation study. (M.Sc. thesis). Haramaya University, Ethiopia.
Habtewold, Y.W. (2009). Preference for health care financing options and willingness to pay for compulsory health insurance among government employees in Ethiopia. Umeå International School of Public Health.
Hagos, D., Mekonnen, A. and Gebreegziabher, Z. (2013). Households Willingness to Pay for Improved Urban Solid Waste Management: The Case of Mekelle City, Ethiopia. Ethiopian Journal of Economics. 22(1): 107-138.
Haji, J. (2013). Urban Households’ Willingness to Pay For Improved Solid Waste Management Services: An Application of Choice Experiment in Harar Town, Ethiopia.
Han, F. , Yang, Z. , Wang, H. and Xu, X. (2011). Estimating willingness to pay for environment conservation: a contingent valuation study of Kanas Nature Reserve, Xinjiang, China. Environmental Monitoring and Assessment. 180(1): 451-459.
Hausman, J.A. (1993). Contingent valuation. A critical assessment: Emerald Group Publishing Limited.
Howley, P., Hynes, S and Campbell, D. (2011). A choice experiment versus a contingent valuation approach to agri-environmental policy valuation.
Hoyos, D. and Mariel, P. (2010). Contingent valuation: Past, present and future. Prague Economic Papers. 4(2010): 329-343.
Jantzen, J. (2006). The Economic value of natural and environmental resources. Institute for Applied Environmental Economics, Nedherland.
Kalbali, E. , Borazjani, M. , Kavand, H. and Soltani, S. (2014). Factors affecting the willingness to pay of Ghorogh forest park visitors in Iran. International Journal of Plant, Animal and Environmental Sciences. 4(3): 368-373.
Kasaye, B. (2015). Farmers willingness to pay for improved soil conservation practices on communal lands in Ethiopia.
Kassahun, H.T. (2009). Payment for environmental service to enhance resource use efficiency and labor force participation in managing and maintaining irrigation infrastructures: the case of Upper Blue Nile Basin.(M.Sc. thesis).Cornell University, USA.
Khalid, A.R. (2008). Economic valuation of the goods and services of coastal habitats. The Regional Training Workshop, March 24 – 28, 2008.
Kjær, T. (2005). A review of the discrete choice experiment-with emphasis on its application in health care: Syddansk Universitet Denmark.
Lee, J.F. , Springborn, M. , Handy, S.L. , Quinn, J.F. and Shilling, F.M. (2010). Approach for Economic Valuation of Environmental Conditions and Impacts. . Prepared for Caltrans, Pp. 123.
Lipton, D.W. , Wellman, K. , Sheifer, I.a. and Weiher, R. (1995). Economic valuation of natural resources: a handbook for coastal resource policymakers.
Mamat, M.P., Yacob, M.R. , Radam, A., Ghani, A.N.A. and Fui, L.H. (2013). Willingness to pay for protecting natural environments in Pulau Redang Marine Park, Malaysia. African Journal of Business Management. 7(25): 2420.
Mekdes, T. (2014). Analysis of visitors willingness to pay for recreational use value of''Menagesha Suba''Forest Park: application of contingent valuation method. (M.Sc. thesis). Addis Abeba Universisty, Ethiopia.
Morrison, M. (2009). A guide for estimating the non-market values associated with improved fire management. Report prepared for the Bushfire Co-operative Research Centre.
Mould Quevedo, J.F., Contreras Hernández, I. , Garduño Espinosa, J. and Salinas Escudero, G. (2009). The willingness-to-pay concept in question. Revista De Saude Publica. 43(2): 352-358.
Nuva, R., Shamsudin, M.N., Radam, A. and Shuib, A. (2009). Willingness to pay towards the conservation of ecotourism resources at Gunung Gede Pangrango National Park, West Java, Indonesia. Journal of Sustainable Development. 2(2): 173.
Pearce, D. and Özdemiroglu, E. (2002). Economic valuation with stated preference techniques: summary guide: Department for Transport, Local Government and the Regions London.
Philcox, N. (2007). Literature review and framework analysis of non-market goods and services provided by British Columbia's ocean and marine coastal resources: Canada/British Columbia Oceans Coordinating Committee.
Robinson, J. (2001). Techniques to value environmental resources in coastal zones: a review. CRC for coastal zone estuary and waterway management, university of Queensland.
Samuelson, P.A. (1938). A note on the pure theory of consumer's behaviour. Economica. 5(17): 61-71.
Selam, A. (2013). Estimating the Outdoor Recreational Value of Lake Hawassa: an Application of Individual Travel Cost Method (ITCM). (M.Sc. thesis). Addis Abeba University, Ethiopia.
Senayet, B. (2014). Determinants of farm households’ willingness to pay for restoration of Lake Haramaya, Eastern Ethiopia. (M.Sc. thesis). Haramaya University, Ethiopia.
Siew, M.K., Yacob, M.R., Radam, A., Adamu, A. and Alias, E.F. (2015). Estimating willingness to pay for wetland conservation: a contingent valuation study of Paya Indah Wetland, Selangor Malaysia. Procedia Environmental Sciences. 30: 268-272.
Stephens, M. (2010). Review of Stated preference and willingness to pay methods.
Tang, Z. , Nan, Z. and Liu, J. (2013). The willingness to pay for irrigation water: A case study in Northwest China. Global Nest Journal. 15(1): 76-84.
Tilahun, H. (2009). Payment for environmental service to enhance resource use efficiency and labor force participation in managing and maintaining irrigation infrastructure: The case of Upper Blue Nile Basin.
Tilahun, M., Mathijs, E., Muys, B., Vranken, L., Deckers, J., Gebregziabher, K., Bauer, H. (2011). Contingent valuation analysis of rural households’ willingness to pay for frankincense forest conservation. Paper presented at the 2011 International Congress, Zurich: European Association of Agricultural Economists.
Tinelli, M. (2016). Applying discrete choice experiments in social care research: NIHR School for Social Care Research London School of Economics and Political Science..
Ulibarri, C.A. and Wellman, K.F. (1997). Natural resource valuation: A primer on concepts and techniques: Battelle Columbus Div, United States.
Woretaw, E. , Woubishet, D. and Asmare, W. (2017). Households’ preferences and willingness to pay for improved solid waste management interventions using choice Experiment approach: Debre Tabor Town, Northwest Ethiopia. Journal of Economics and Sustainable Development. 8(7): 16-32.
Youe, A. and Pabuayon, I.M. (2011). Willingness to pay for the conservation of flooded forest in the Tonle Sap Biosphere Reserve, Cambodia. International Journal of Environmental and Rural Development. 2(2): 1-5.
Copyright (c) 2019 Journal of Agriculture and Environmental Sciences
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
