congestion problems (e.g. recreation areas) may sometimes arise. When the public
good (e.g. fireworks show) is available, the marginal cost of an extra person enjoying
the public good is zero.
Thus, if an individual is willing to pay to enjoy a good rather go without the same
good, this expresses his assessment of the benefit obtained. If the response from all
individuals (the sample survey) are added together (e.g. through adding all the
ordinates of the individual compensated demand curves), this will give an estimation
of aggregated willingness to pay.
There are two important types of bidding games:
1. single bid games, where a respondent is requested to mention the maximum
amount he would be willing to pay or the minimum compensation level he would
agree to, in exchange for the option of buying that good, and
2. iterative (or converging) bid games, where a respondent is queried on his willingness to pay Rs. Y for a given situation or good. The amount Y is iteratively
modified until a minimum willingness to accept compensation (or a maximum
willingness to pay) is attained.
The average of the responses is then determined and extrapolated to reach an
aggregate willingness to pay or an aggregate level of compensation for the whole
population.
8.8.3 Take-it-or-Leave-it Experiments
In a take-it-or-leave-it experiment, respondents are haphazardly separated into
sub-samples of cells. Each cell (or person) is presented with a different sum of
money, but with the same question to answer: e.g. “would they be willing to accept
Rs.100, Rs.200, Rs.400 or Rs.600 to allow the air in their neighbourhood to become
more polluted?”, with either a YES (take it) or NO (leave it) answer. Each cell
(person) is offered only one sum to decide upon, and the different sums are randomly
dispersed across the entire survey sample. The end result is a number of cells each
with a certain percentage of people who would or who would not agree to the sum
offered. The answers would then be processed using a logit model to produce a
willingness to pay (or accept) for the average consumer. This figure multiplied by the
number of affected people would then give the aggregate willingness to pay
(or accept).
8.8.4 Trade-off Games
In this method, individuals are requested to choose among various packages of
goods. They are, most often, offered a combination of money and various levels,
or amounts, of an environmental good. The respondent is given a situation provided
8.8 Survey-Based Methods and Macroeconomic Models
235
good (e.g. fireworks show) is available, the marginal cost of an extra person enjoying
the public good is zero.
Thus, if an individual is willing to pay to enjoy a good rather go without the same
good, this expresses his assessment of the benefit obtained. If the response from all
individuals (the sample survey) are added together (e.g. through adding all the
ordinates of the individual compensated demand curves), this will give an estimation
of aggregated willingness to pay.
There are two important types of bidding games:
1. single bid games, where a respondent is requested to mention the maximum
amount he would be willing to pay or the minimum compensation level he would
agree to, in exchange for the option of buying that good, and
2. iterative (or converging) bid games, where a respondent is queried on his willingness to pay Rs. Y for a given situation or good. The amount Y is iteratively
modified until a minimum willingness to accept compensation (or a maximum
willingness to pay) is attained.
The average of the responses is then determined and extrapolated to reach an
aggregate willingness to pay or an aggregate level of compensation for the whole
population.
8.8.3 Take-it-or-Leave-it Experiments
In a take-it-or-leave-it experiment, respondents are haphazardly separated into
sub-samples of cells. Each cell (or person) is presented with a different sum of
money, but with the same question to answer: e.g. “would they be willing to accept
Rs.100, Rs.200, Rs.400 or Rs.600 to allow the air in their neighbourhood to become
more polluted?”, with either a YES (take it) or NO (leave it) answer. Each cell
(person) is offered only one sum to decide upon, and the different sums are randomly
dispersed across the entire survey sample. The end result is a number of cells each
with a certain percentage of people who would or who would not agree to the sum
offered. The answers would then be processed using a logit model to produce a
willingness to pay (or accept) for the average consumer. This figure multiplied by the
number of affected people would then give the aggregate willingness to pay
(or accept).
8.8.4 Trade-off Games
In this method, individuals are requested to choose among various packages of
goods. They are, most often, offered a combination of money and various levels,
or amounts, of an environmental good. The respondent is given a situation provided
8.8 Survey-Based Methods and Macroeconomic Models
235