Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations

S. H. Yoo, Seung-Jun Kwak, T. Y. Kim

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

Modelling household behaviour with the data from dichotomous choice contingent valuation (DCCV) surveys is often complicated by zero willingness to pay (WTP) responses in the sample. To deal with the zero responses, a two-equation model is considered, which incorporates a two-level decision structure, a decision on whether to participate in having WTP and a decision on the WTP amount conditional on deciding to participate, and two separate stochastic processes that determine the probability and conditional level of WTP are featured. The model is empirically applied to household survey data, in which the DCCV questions concerned the benefits of air quality improvement in Korea. To put the issue of the two-equation model in perspective, this paper also experiments with economic and econometric specifications: Utility theoretic restriction and heteroscedasticity. It is shown how failure to allow for the restriction distorts aggregate benefit estimates and the existence of heteroscedasticity in error term is found.

Original languageEnglish
Pages (from-to)523-529
Number of pages7
JournalApplied Economics
Volume33
Issue number4
Publication statusPublished - 2001 Apr 3

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Willingness-to-pay
Modeling
Dichotomous choice
Contingent valuation
Heteroscedasticity
Econometrics
Experiment
Air quality
Korea
Stochastic processes
Quality improvement
Household survey
Survey data
Household behavior
Economics

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Modelling willingness to pay responses from dichotomous choice contingent valuation surveys with zero observations. / Yoo, S. H.; Kwak, Seung-Jun; Kim, T. Y.

In: Applied Economics, Vol. 33, No. 4, 03.04.2001, p. 523-529.

Research output: Contribution to journalArticle

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