Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent Valuation: Use of Explicit Decision Rules and Sequential and Advance Revelation Learning Design (LDCV) Claudia D. Aravena Novielli* a Fredrik Carlsson b W. George Hutchinson a Dave Matthews a a. Queen’s University Belfast b. University of Gothenburg Camp Resources XVII Wilmington, June 24-25, 2010

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Introduction Double Bounded Dichotomous Choice Contingent Valuation Anomalies Differences between SB – DB (SBDB Diff ) Advance Revelation Explicit Decision Rules

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Introduction Elicitation Format: Double Bounded Referendum WTP 1000 ? WTP 250? WTP 500? YES NO YES YY YN NY NN

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Background Hannemann et al.1991 popularized DBDC while recognize the DBDC Diff (MWTP SB > MWTP DB ). Carson et al 2009 and Deshazo 2002 outline 7 explanations for the SBDB Diff. Carson et al. 2009 describes the Difference as stereotypical facts JEEM 2008 following Matthews et al. 2003 develops a simple test for the significance of the SBDB Diff using resampling methods.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Introduction JEEM 2008  SBDB Diff reduces in repeated valuations by Institutional Learning (LDCV). JEEM 2004  Introduce Advance Revelation. We use this to effect Institutional Learning and find SBDB Diff is reduced (ARLD). We combine Advance Revelation with repeated valuations affecting more reduction in SBDB Diff JEEM 2009  in a lab experiment used a Decision Rule to clarify outcomes of the second vote and removed SBDB Diff. In a field CVM we combine Advance Revelation with the Decision Rule and test removal SBDB Diff.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Design of the Study Contingent Valuation Method Frame: WTP for Renewable Energy sources Sequential valuations with 2 baselines: –Renewable Energies instead of Hydropower –Renewable Energies instead of Fossil Fuels. 3 Split Samples Treatments: (1100 interviews) –Sample 1: Control treatment –Sample 2: Advance Revelation (AR) treatment –Sample 3: Advance Revelation + Decision Rule treatment (DR)

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Design of the Study and Hypotheses RE instead of HE (1st Valuation)RE instead of TE (2nd Valuation) TREATMENTSBDBSBDB Diff SBDBSBDB Diff Control AR AR+DR > > SBDB Diff

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Objective Re test LDCV (reduction in the SBDB Diff ) and SE ? We test if Advance Revelation Learning in isolation and combine with LDCV reduces SBDB Diff and SE? We test if the Decision Rule (JEEM 2009) further attenuates SBDB Diff and SE?

Gibson Institute for Land, Food and Environment Institute for a Sustainable World QUESTIONNAIRE SCENARIO Brief description of the current energy situation of Chile. Presentation and description of the hydropower projects in Chilean Patagonia (Patagonia, location of projects and impacts). Presentation and description of the renewable energy sources and its impacts. First Valuation task Description of the fossil fuel sources and its impacts. Presentation and description of the renewable energy sources and its impacts. Second Valuation task

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Advance Revelation on Valuation Sequence In producing the 15% extra electricity required in Chile we are looking at how much more you would be willing to pay for this renewables alternative over the two other types of energy. In what follows you will be asked how you would vote if a referendum was held to choose between renewable energy and each of the other alternatives.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Advance Revelation on DB Institution Because the exact cost of the projects is not known today, we will ask you to vote on 2 different costs for each project. These costs represent the range into which the actual cost should fall. In what follows, you will vote for or against each alternative. You are asked how you would vote if the good could be provided at one of the two cost. This is followed directly by a second vote on how you would vote if the good could be provided at the second of the two costs.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Decision Rule Now imagine that the cost to you was $________ (Higher/Lower price) and the outcome of this second vote replaces that of the first vote, so that if a majority vote “Yes” in favour of the proposal the renewable energy projects are developed and if a majority vote “No” the Patagonian dams project will go ahead. We will not ask you to vote again at another cost on this proposal. Would you vote Yes or No?

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Results – Estimations First Valuation RE instead of HYDROPOWER – HE (1 st Valuation) CONTROLARAR + DR SBDBSBDBSBDB Constant 2.37 (7.39) 2.35 (11.94) 2.52 (8.00) 2.36 (11.15) 2.47 (8.30) 2.34 (11.54) Bid -0.50 (-3.33) -0.61 (-12.12) -0.67 (-4.49) -0.70 (-12.44) -0.72 (-5.16) -0.70 (-13.08) WTP4776.543878.093787.323343.653425.033349.73 SE-wtp901.99191.04474.09161.44350.79160.77 # Obs340 323 340

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Results – Estimations Second Valuation RE instead of THERMOELECTRIC – TE (2 nd Valuation) CONTROLARAR + DR SBDBSBDBSBDB Constant 2.16 (8.48) 2.31 (12.37) 1.92 (7.69) 1.79 (9.84) 1.88 (7.71) 1.96 (10.63) Bid -0.42 (-6.33) -0.49 (-14.97) -0.50 (-7.46) -0.49 (-15.31) -0.43 (-6.83) -0.45 (-15.06) WTP5121.784674.473849.773631.624382.924359.09 SE-wtp413.59217.31264.62226.79318.32239.77 # Obs340 323 340

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Results – SBDB Diff HE (1st Valuation)TE (2nd Valuation) TREATMENTSBDBDIFSBDBDIF Control 4776.54 (901.53) 3878.09 (191.04) 898.45 5121.78 (413.59) 4674.47 (217.31) 447.31 AR 3787.32 (474.09) 3343.64 (161.44) 443.68 3849.77 (264.62) 3631.62 (226.79) 218.15 AR+DR 3425.03 (350.79) 3349.73 (160.77) 75.3 4382.92 (318.32) 4359.09 (239.77) 23.83

Gibson Institute for Land, Food and Environment Institute for a Sustainable World

Conclusions JEEM 2008 and 2009 looks only at significant SBDB Diff. This study also considers effect of AR, DR and LDCV on SE like the American literature. As in JEEM 2008, the SE on first SB valuation is several magnitude greater than other SE. AR appears to be almost same reduction in SBDB DIFF and SE as a repeated valuation in LDCV. Adding DR to AR greatly reduces the SBDB DIFF in the first valuation but even more in the second valuation and it takes out the strategically behavior.

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Thanks for your attention Questions Contact Details: Claudia Aravena caravena02@qub.ac.uk

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Results - Responses Hydropower (1 st Valuation)Thermoelectric (2 nd Valuation) TREATMENTYYYNNYNNYYYNNYNN Control (340 responses) 200 (58.82%) 77 (22.65%) 27 (7.94%) 36 (10.59%) 157 (46.18%) 80 (23.53%) 57 (16.76%) 46 (13.53%) AR (323 responses) 182 (56.35%) 76 (23.53%) 33 (10.22%) 32 (9.91%) 120 (37.15%) 66 (20.43%) 60 (18.58%) 77 (23.84%) AR+DR (340 responses) 196 (57.65%) 67 (19.71%) 38 (11.12%) 36 (10.59%) 147 (43.24%) 62 (18.24%) 69 (20.29%) 62 (18.24%)

Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent.

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Gibson Institute for Land, Food and Environment Institute for a Sustainable World Internal Consistency in Double Bounded Dichotomous Choice Contingent.

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