Choice Modelling and Tests of Benefit Transfer

Choice modelling (CM) is a stated preference technique that is increasingly being used to generate estimates of non-market values. In CM applications, respondents to a survey are presented with several sets of options, which contain common attributes but at varying levels, and are asked to select their preferred alternative from each set. The information provided by respondents’ choices is used to estimate marginal rates of substitution and, hence, estimates of value. In this paper the results from three separate CM applications are presented. Estimates are made of the value of improving the quality of wetlands. The first two applications focused on the Gwydir Wetlands in New South Wales, Australia. One survey was conducted in Sydney, a major urban centre, and the second was conducted in Moree, a rural centre close to the Gwydir Wetlands. The third survey, which was also conducted in Sydney, focused on the Macquarie Marshes, another wetland in New South Wales. An objective of the study was to test the suitability of using CM derived estimates for benefit transfer, both across different populations and across different wetlands. CM is potentially suited to benefit transfer because it is possible to allow for differences in environmental improvements between sites as well as differences in socio-economic characteristics between respondent populations. Several tests aimed at determining the validity of transfers using CM across sites and populations are presented. These include tests of the equality of models, implicit prices and estimates of compensating surplus. Subject Matter Area: Valuation and Cost-Benefit Analysis 1 Paper to be presented at the World Congress of Environmental and Resource Economists, Venice, Italy, June 25-27 1998. Funding for this research has been provided by the Land and Water Resources Research and Development Corporation, Environment Australia, the New South Wales National Parks and Wildlife Service, and the New South Wales Environment Protection Authority.