Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: In this paper we analyze the multiple-bounded (MB) format in which uncertainty is directly incorporated into the WTP question. We introduce a new approach to estimate mean and median willingness to pay (WTP) using MB data by allowing respondents to expand their WTP intervals by shifting their upper bound. Thus, less certain respondents will state a wider WTP interval. This differs from the Welsh and Poe (1998) approach (WP) which shifts the entire WTP interval and likely overestimates mean and median WTP when uncertainty is introduced. To compare empirically our expansion approach to the WP-approach, we use survey data from 2004 that elicited WTP for implementation of a predator protection policy in Sweden. In addition to its more intuitive appeal, our results indicate that the interval expansion approach better fits the data and provides a smaller range of estimated WTP. It also with better precision estimates the mean and median WTP when preference uncertainty is considered, and its estimates are less sensitive to alternative distributional assumptions.

Keywords: contingent valuation; preference uncertainty; elicitation format; multiple-bounded; payment card; willingness to pay; predators

JEL-codes: C81; Q20; Q26; Q28

20 pages, June 7, 2007

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