Demand Based and Contingent Valuation: An Empirical Comparison (original) (raw)

The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regression analyses have shown CVM results to be systematically related to individual demographic characteristics and generally consistent with preferences revealed by actual market choices (Tolley, et al.). Direct comparisons of CVM results with market demand based measures are less conclusive. Such comparisons typically reveal more about the variability of the demand based method than about the performance of CVM. Additionally, relatively few coherent concepts have been available to guide empirical research and testing. The objective of this paper is an improved comparison of CVM and market based valuations. As a first step, previous empirical analyses are briefly reviewed and highlighted by recent conceptual results. Second, the valuation context is considered. Recent travel demand research is combined with Maler's notion of weak complementarity to derive a surprisingly simple, market based measure of site specific surplus. Third, the contingent valuation experiment is described. Because both the travel demand approach and the CVM experiment yield both variances as well as means, the comparison of surplus measures can be based upon standard. statistical tests rather than on simple comparisons of absolute values. Previous Research Previous studies have had some difficulty in designing a direct comparison between the CVM and demand based techniques. More often than not, a given valuationcontext lends itself to either a demand based technique or the CVM but not both. Nevertheless, two types of market based comparisons have been made: (1) those 1 based on the travel cost technique and (2) those using the hedonic approach.