Environmental Economics: A Survey

Received microeconomic theory presumes rational consumers maximize utility over all commodity bundles. Recent analysis, however, suggests that a consumer's status quo may limit economic rationality, "bias" consumer decisions, and induce serious errors in survey-based valuations of public and private goods. Using regression and choice-theoretic frameworks, we investigate the existence of status quo effects in the consumer valuation of a particular unpriced product—the reliability of residential electrical service. Such valuations have become important in electric utility resource planning and rate making. We find substantial status quo effects, which must be addressed in welfare comparisons regarding electric service reliability.

Consumer Rationality and the Status Quo

https://digital.library.unt.edu/ark:/67531/metadc900993/m2/1/high_res_d/927007.pdf

Using contingent valuation to explore willingness to pay for renewable energy: A comparison of collective and voluntary payment vehicles

Using Contingent Valuation to Explore Willingness to Pay for Renewable Energy: A Comparison of Collective and Voluntary Payment Vehicles Ryan H. Wiser 1 Lawrence Berkeley National Laboratory 1 Cyclotron Rd., MS 90-4000, Berkeley, California 94720 Abstract This study uses a split-sample, dichotomous choice contingent valuation survey of 1,574 U.S. residents to explore willingness to pay (WTP) for renewable energy under collective and voluntary payment vehicles, and under government and private provision of the good. We also evaluate the impact of “participation expectations” on stated WTP. We find some evidence that, when confronted with a collective payment mechanism, respondents state a somewhat higher WTP than when voluntary payment mechanisms are used. Similarly, private provision of the good elicits a somewhat higher WTP than does government provision. We also find that contingent valuation responses are strongly correlated with expectations for the WTP of others. Our results shed light on strategic response behavior and the incentive compatibility of different CV designs, and offer practical insight into U.S. household preferences for how to support renewable energy. Keywords: Contingent valuation; Renewable energy; Willingness to pay; Payment vehicles Introduction Some of the most basic questions about the organization and functioning of society involve issues raised by the existence of public goods. With respect to environmental public goods, how should funds used to support environmental improvement be collected and used? In particular, are collective, mandatory payments superior to voluntary, charitable payments due to the possibility of free riding? And to what degree should the government be involved in spending these funds: should Corresponding author. Tel.: 1-510-486-5474; fax: 1-510-486-6996. E-mail address: rhwiser@lbl.gov (Ryan H. Wiser).

Using Contingent Valuation to Explore Willingness to Pay for Renewable Energy: A Comparison of Collective and Voluntary Payment Vehicles

We have described a number of ‘invalidating factors,’ any one of which, if present, could account for the weakness or absence of the free rider problem in the voluntary provision of a public good. When any of these factors is present, the free rider phenomenon is not necessarily an implication of economic theory. These invalidatingg factors have been used as a guide in the construction of an experiment which, by avoiding all such factors, should exhibit the free rider phenomenon. The results of performing the experiment indicate that the free rider hypothesis should not be rejected. The contrast between this result and previous experimental results indicates that some of the factors we have identified will be important in attempting to explain the presence or absence of the free rider phenomenon in any particular situation in which a public good is to be financed by voluntary means.

The free rider problem: Experimental evidence

Pricing public goods

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Pricing public goods

The Remote Computer Terminal as an Experimenter Surrogate in Behavioral Research