Thinking and Deciding

334 UTILITY MEASUREMENT
really deciding between spending money on crime or the environment, we can usually
estimate the effects of the alternative programs. Someone who said that crime
is more important might still prefer a very cost-effective program to clean up the
environment over an ineffective program to fight crime.
It is difficult to avoid the prominence effect even when comparing utility differences.
Respondents do not pay enough attention to the ranges given, the differences
between one end and the other of each dimension. Keeney (1992, p. 147) calls underattention
to range “the most common critical mistake.” Subjects in experiments
on weight assignment are often undersensitive to the range (Weber and Borcherding,
1993). Doubling the range of money, for example, should approximately double its
relative importance, but this rarely happens.
Underattention to range can be reduced. Fischer (1995) found complete undersensitivity
to range when subjects were asked simply to assign weights to ranges (for
example, to the difference between a starting salary of $25,000 and $35,000 and between
5 and 25 vacation days — or between 10 and 20 vacation days — for a job).
When the range of vacation days doubled, the judged importance of the full range of
days (10 versus 20) relative to the range of salaries ($10,000) did not increase. Thus,
subjects showed inconsistent rates of substitution depending on the range considered.
Subjects were more sensitive to the range, with their weights coming closer to the
required doubling with a doubling of the range, when they used either matching or
direct judgments of intervals. In matching (as described earlier in this section), the
subject changed one value of the more important dimension so that the two dimensions
were equal in importance, for example, by lowering the top salary of the salary
dimension. In direct judgment, subjects judged the ratio between the less important
and more important ranges, for example, “the difference between 5 and 25 vacation
days is 1/5 of the difference between $25,000 and $35,000.” (This is also called the
method of “swing weights.”)
Contingent valuation (CV)
One form of matching involves willingness to pay or accept money. This is called
contingent valuation (CV; Mitchell and Carson, 1989). The idea was to create a contingent
or hypothetical market to determine the market value of goods that could not
be bought or sold in markets, such as clean air or a pristine wilderness. For example,
in 1989, the tanker Exxon Valdez spilled about 11 million gallons of crude oil into
Prince William Sound on the coast of Alaska. The oil killed birds, fish, seals and sea
otters. It spoiled the beaches and the vegetation. Under the law, Exxon was required
to pay a penalty equal to the value of the damage it caused, including damage to
the environment, and including environmental damage that had no effect on commercial
activity. Although Exxon finally reached a settlement with the governments
of Alaska and the United States without an actual determination of the value of the
damage, a preliminary study had already begun the process of evalating the damage
with the CV method (Carson, Mitchell, Hanemann, Kopp, Presser, and Ruud, 1992).