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A spatial probit modeling approach to account for spatial spillover Effects in dichotomous choice contingent valuation surveys: Working paper series--10-15

Mueller, Julie and Loomis, John (2010) A spatial probit modeling approach to account for spatial spillover Effects in dichotomous choice contingent valuation surveys: Working paper series--10-15. Working Paper. NAU W.A. Franke College of Business.

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Abstract

We present a demonstration of a Bayesian spatial probit model for dichotomous choice Contingent Valuation Method (CVM) willingness to pay (WTP) questions. If respondents' propensities to vote "yes" on a WTP question is similar to those in nearby locations, spatial dependence exists within the data, and traditional probit models will result in biased estimated coefficients and thus biased WTP estimates. Few studies applying spatial probit models to dichotomous choice CVM estimate WTP exist, and no study demonstrates WTP calculations that account for spatial spillovers. However, recent advances in Bayesian estimation through application of Markov Chain Monte Carlo simulations and Gibbs sampling allow tractable estimation of spatial probit models that explicitly model spatial dependence. We test for spatial dependence and compare WTP using a traditional non-spatial probit and a spatial probit for protecting Mexican Spotted Owl habitat . The spatial autoregressive parameter is statistically significant in the spatial probit, indicating that spatial spillover effects exist within our data. WTP from the spatial probit is $65.99 per household, while WTP from the standard probit is only $52.65. While we fail to reject the null hypothesis of a zero mean difference in WTP using the complete combinatorial method, the $13.34 difference in mean estimates is economically significant when aggregating across large populations.

Item Type: Monograph (Working Paper)
Publisher’s Statement: Copyright, where appropriate, is held by the author.
ID number or DOI: 10-15
Keywords: Working paper, spatial probit model, contingent valuation method, willingness to pay, Mexican Spotted Owl, habitat protection
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HJ Public Finance
NAU Depositing Author Academic Status: Faculty/Staff
Department/Unit: The W.A. Franke College of Business
Date Deposited: 17 Oct 2015 20:06
URI: http://openknowledge.nau.edu/id/eprint/1488

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