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What is contingent valuation?

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I went on a rant (the kids call it a "tweet storm") and since I don't know how to thread my tweets (and I don't want to lose them when Congress shuts down twitter) I thought I'd post them here (with spell check turned on). Tim was also in on it. This happened after I presented a paper using "discrete choice experiment" (DCE) data in Tim's department (that was fun!) so the thing was on our minds.

Here we go:

  • John: Yes, CVM is out. And “discrete choice experiments” are in. And, they are the same thing (under certain conditions)!
  • John: They are the same thing when the chioce is a for/against referendum with varying cost and benefit of a movement away from the status quo.
  • Tim: CV is a DCE with variation in one attribute (typically) and the price. DCE is more flexible but subject to potentially more biases.
  • John: I’m not sure why folks are describing CVM as something other than DCE, other than to try to avoid BP funded criticism.
  • Tim: To understand the criticism, follow the $.
  • John: Given all the CVM nonsense, you’re kinda stupid to call your study CVM and not DCE (call me stupid)
  • Tim: For fun, let’s write a paper called “Scope Effects in DCE” and just use one attribute and price and see if anyone notices.
  • John: First, write the CVM paper and send to Land Econ (or Env Res Econ) and get rejected because of Hausmann, Diamond and McFadden 1/n
  • Tim: Then global replace “scope” with “attribute” and “CVM” with “DCE” and get R&R at Env Res Econ (or Land Econ) 2/n
  • John: I honestly believe that’s how dumb it’s become 3/n
  • John: I’m working on an R&R where a referee says you can’t (i.e., it’s not allowed) to ask a follow up CVM question anymore 4/n
  • John: We explicitly test for changes/biases with the second question 5/n
  • John: Research is about trying new things and discovery, not following the rules of the authority figures 6/n
  • John: The NRDA context is very different than RESEARCH, the consultants and those who read them uncritically don’t care to differentiate 7/7

Here is the brief off-the-top-of-my-head history of thought:

  • Mitchell and Carson (Using Surveys to Value Public Goods, RFF Press, 1989) define CVM as a hypothetical yes/no response to a randomly assigned cost variable. Variations in attributes of the policy/program (aka "scope") is one internal validity test.
  • Carson and Louviere (Env and Res Econ, 2011) define referendum CVM with a scope test as a special case of DCE (as in the John/Tim tweets above). Payment card and open ended elicitation questions are CVM only. 
  • Carson and Czajkowski (chapter 9 in Hess and Daly 2014) make the point in Carson and Louviere a bit more clear
  • Zawojska and Czajkowski (J Env Econ Policy 2017) take it one step too far and say that referendum CVM with a scope test is DCE and not CVM.
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  1. mik Avatar
    mik

    Hi John,
    Thanks for noting our paper. Actually, we say:
    “SP surveys apply various preference elicitation formats, which can be classified into one of the two categories: contingent valuation (CV) or discrete choice experiments (DCEs). In CV surveys, respondents indicate a specific number that expresses their valuation of the good or policy; respondents are usually asked to state their maximum WTP. An open-ended direct question and a payment card are the most commonly used CV formats. The former straightforwardly asks respondents about their WTP, whereas the latter provides respondents with a range of monetary values, from which they select the one representing their WTP. In contrast to CV, DCE surveys present respondents with a set of possible variants of a good or of a policy, and ask them to choose their most preferred option. Formats within this category differ with respect to the number of choice tasks and of possible response options. Table 1 briefly summarises commonly used DCE approaches.”
    and we only talk about scope tests in relation to stated preference studies generally (not to differentiate between CVs and DCEs).
    I wish there was widely accepted “common nomenclature”. Often CVs and DCEs are the same thing – like a single binary choice question that involves monetary payment. But not all CVs are DCEs (e.g., when they use non-discrete choice formats) and not all DCEs are CVs (e.g., when there is no valuation involved, like in some route choice studies). My impression is that the majority of people associate CVs with a single choice format (yes or no to a new policy at a cost, using payment card, etc.) and use DCEs to describe many choices or a choice from many alternatives for a single respondent. This is also the pressure I am getting from reviewers sometimes. So in the spirit of being understood better, I do not mind using CV or DCE (whichever is better received in a given context) when it is the same thing, really.
    The common nomenclature for modelling approaches is another thing to deal with. So that we do not have to say things like “discrete choice mixed (random parameters) conditional multinomial logit” to be clear what we mean when we use the MXL model.
    I wish guidelines dealt with things like that.
    Best,
    Mik

    Reply
  2. John Whitehead Avatar
    John Whitehead

    Mik,
    I really like your paper and agree with your sentiments in your comment. The only thing I disagree about is the differentiation between CVM and DCE in your first quote. I think there is a bit of overlap. A non-repeating single bound referendum CVM with a scope test is the very simplest DCE question.
    The place where I was not clear is the form of the scope test. If it is the old-fashioned [0,1] scope test that is still being used in the U.S. NRDA context (see the Federal BP oil spill study) then that is probably best labeled CVM. But, if the scope test is conducted with an attribute that varies then the question is both CVM and DCE.
    At least, that’s how I’m thinking about it now.

    Reply

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