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Using Labels to Investigate Scope Effects in Stated Preference Methods

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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.

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Authors and Affiliations

  1. Warsaw Ecological Economics Center, University of Warsaw, Warsaw, Poland

    Mikołaj Czajkowski

  2. Economics Department, University of Stirling, Stirling, UK

    Nick Hanley

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  1. Mikołaj Czajkowski
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  2. Nick Hanley
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Correspondence to Mikołaj Czajkowski.

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Czajkowski, M., Hanley, N. Using Labels to Investigate Scope Effects in Stated Preference Methods. Environ Resource Econ 44, 521–535 (2009). https://doi.org/10.1007/s10640-009-9299-z

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  • DOI: https://doi.org/10.1007/s10640-009-9299-z

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