Using labels to investigate scope effects in stated preference methods

Citation

Czajkowski M & Hanley N (2009) Using labels to investigate scope effects in stated preference methods. Environmental and Resource Economics, 44 (4), pp. 521-535. https://doi.org/10.1007/s10640-009-9299-z

Abstract
Insufficient sensitivity to scope (variations in the scale of the environmental good on offer) remains a major criticism of stated preference methods, and many studies fail a scope test of some sort. Across a range of existing explanations for insensitivity to scope (commodity mis-specification, embedding, warm glows) there seems to exist no clear conclusion on how to deal with the problem. This paper provides an alternative explanation for insufficient sensitivity to scope, based on re-definition of the determinants of value for environmental goods within an attributes-based choice model. In the proposed framework respondents' Willingness To Pay need depend not only on physical characteristics of a good, but may also depend on the 'label' under which the environmental good is 'sold' in the hypothetical market. To investigate this problem, a Choice Experiment study of biodiversity was conducted. We find that controlling for the effects of a label - in this case, national park designation - leads to significant increase in the scope sensitivity of welfare measures.

Keywords
Scope test; Embedding; Warm glow; Label effect; Choice experiment; Contingent valuation; Biodiversity valuation; National park; Biodiversity resources;

Journal
Environmental and Resource Economics: Volume 44, Issue 4