Monte Carlo Benchmarks for Discrete Response Valuation Methods

This paper argues that the belief that discrete contingent valuation (CV) questions yield substantially larger estimates of the mean (and the median) willingness to pay (WTP) for nonmarket resources in comparison to open-ended CV questions is unfounded. Monte Carlo experiments estimate the factors influencing the performance of WTP estimates based on discrete response models. Most of the error arises from the specification errors common to the empirical models in the literature. These experiments suggest models where WTP is dominated by nonuse (or passive use) values are likely to have smaller errors than where large use values influence these decisions.