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Validity of Willingness to Pay Measures under Preference Uncertainty.

ABSTRACT: Recent studies in the marketing literature developed a new method for eliciting willingness to pay (WTP) with an open-ended elicitation format: the Range-WTP method. In contrast to the traditional approach of eliciting WTP as a single value (Point-WTP), Range-WTP explicitly allows for preference uncertainty in responses. The aim of this paper is to apply Range-WTP to the domain of contingent valuation and to test for its theoretical validity and robustness in comparison to the Point-WTP. Using data from two novel large-scale surveys on the perception of solar radiation management (SRM), a little-known technique for counteracting climate change, we compare the performance of both methods in the field. In addition to the theoretical validity (i.e. the degree to which WTP values are consistent with theoretical expectations), we analyse the test-retest reliability and stability of our results over time. Our evidence suggests that the Range-WTP method clearly outperforms the Point-WTP method.

SUBMITTER: Braun C

PROVIDER: S-EPMC4838267 | biostudies-literature | 2016

REPOSITORIES: biostudies-literature

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Validity of Willingness to Pay Measures under Preference Uncertainty.

Braun Carola C Rehdanz Katrin K Schmidt Ulrich U

PloS one 20160420 4

Recent studies in the marketing literature developed a new method for eliciting willingness to pay (WTP) with an open-ended elicitation format: the Range-WTP method. In contrast to the traditional approach of eliciting WTP as a single value (Point-WTP), Range-WTP explicitly allows for preference uncertainty in responses. The aim of this paper is to apply Range-WTP to the domain of contingent valuation and to test for its theoretical validity and robustness in comparison to the Point-WTP. Using d ...[more]

PMID: 27096163

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Project description:BACKGROUND:Differences in contingent valuation (CV) estimates for identical healthcare goods can cast considerable doubt on the true economic measures of consumer preferences. Hypothetical nature of CV methods can potentially depend on the salience, context and perceived relevance of the good or service under consideration. Thus, the high demand elasticity for healthcare goods warrants careful selection of study population as the contexts of valuation significantly changes after experiencing health shock. METHODS:In this study, using triple-bounded dichotomous choice (TBDC) experiments, we test how negative health shock (namely, being diagnosed with refractive errors), can alter preference over a common health good (namely, corrective eyeglasses). We compared elicited WTP of diagnosed patients with a synthetically constructed comparable cohort without the same health shock, controlling for the possible self-selection using a number of matching techniques based on the observable socio-demographic characteristics. RESULTS:The consumers diagnosed with vision problems exhibit a rightward shift in their demand curve compared to observationally identical consumers without such problems resulting in about 17% higher consumer surplus. The consumers without the health shock are willing to pay about BDT 762.4 [95% CI: BDT 709.9 - BDT 814.9] for corrective eyeglasses, which gets 15-30% higher for the matched with-health-shock consumers. Multivariable analyses suggest more educated and wealthier individuals are willing to pay respectively BDT 208 and BDT 119 more for corrective eyeglasses. We have tested the models for different matching protocols. Our results are fairly robust to alternate specifications and various matching techniques. CONCLUSION:The preferences for healthcare goods, such as eyeglasses, can significantly depend upon the respondent being diagnosed with refractive errors. Our findings have implications for general cost-benefit analyses often relying on WTP, which can vary depending on the contexts. There are also increasing interests in cost recovery models, which require understanding the demand for healthcare goods and services. We find eliciting the demand needs to consider the health status of the population from which the respondents are sampled.

Project description:BackgroundThe Saudi Healthcare System is universal, financed entirely from government revenue principally derived from oil, and is 'free at the point of delivery' (non-contributory). However, this system is unlikely to be sustainable in the medium to long term. This study investigates the feasibility and acceptability of healthcare financing reform by examining households' willingness to pay (WTP) for a contributory national health insurance scheme.MethodsUsing the contingent valuation method, a pre-tested interviewer-administered questionnaire was used to collect data from 1187 heads of household in Jeddah province over a 5-month period. Multi-stage sampling was employed to select the study sample. Using a double-bounded dichotomous choice with the follow-up elicitation method, respondents were asked to state their WTP for a hypothetical contributory national health insurance scheme. Tobit regression analysis was used to examine the factors associated with WTP and assess the construct validity of elicited WTP.ResultsOver two-thirds (69.6%) indicated that they were willing to participate in and pay for a contributory national health insurance scheme. The mean WTP was 50 Saudi Riyal (US$13.33) per household member per month. Tobit regression analysis showed that household size, satisfaction with the quality of public healthcare services, perceptions about financing healthcare, education and income were the main determinants of WTP.ConclusionsThis study demonstrates a theoretically valid WTP for a contributory national health insurance scheme by Saudi people. The research shows that willingness to participate in and pay for a contributory national health insurance scheme depends on participant characteristics. Identifying and understanding the main influencing factors associated with WTP are important to help facilitate establishing and implementing the national health insurance scheme. The results could assist policy-makers to develop and set insurance premiums, thus providing an additional source of healthcare financing.

Dataset Information

Validity of Willingness to Pay Measures under Preference Uncertainty.

Publications

Validity of Willingness to Pay Measures under Preference Uncertainty.

Similar Datasets

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