Valuation Techniques for Social Cost-Benefit Analysis: - HM Treasury

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Regardless of the elicitation format adopted, respondents should always be reminded of their
budget constraint (Bateman et al, 2002, p.143). This is to help ensure that respondents perceive
the questions as real economic choices.
The Design of Choice Modelling Questionnaires
Choice modelling questionnaires are typically structured in much the same way as contingent
valuation questionnaires (see, for example, Tuan and Navrud, 2006). The difference between the
two methods is that choice modelling focuses on the attributes of a non-market good (and the
valuation of these attributes) instead of the whole good. By valuing attributes, choice modelling
can also value the good as a whole.
Most non-market goods can be described by their attributes and the levels that these attributes
take. For example, Mourato et al (2005) estimate the value of different schemes to reduce the
amount of sewage overflows that end up in the River Themes. Such schemes or ‗goods‘ can be
described more specifically in terms of their underlying attributes. In this study, these attributes
include how much the sewage reducing proposal costs (COST), the reduction in fish deaths it
causes (FISH), the reduction in number of days when exposure to river quality is a health risk
(HEALTH), and the reduction in visual disamenity it causes (SEWAGE). Similarly, a wetland can be
described by its bird population, water quality, diversity of animal life, etc. Therefore the value
that individuals attach to the wetland‘s existence is determined by the values attached to the
elements that describe it as a whole.
All CM methods:
present respondents with alternative descriptions of a good, differentiated by different
levels of its attributes; then
ask respondents to either rank, rate, or chose.
For the latter task there are four main choice modelling methods 2 :
choice experiments (‗chose‘);
contingent ranking (‗rank‘);
contingent rating (‗rate‘); and
paired comparisons (‗chose then rate‘).
Choice experiments present respondents with a series of choices between the status quo or ‗do
nothing‘ option and an alternative option or options. The ‗do nothing‘ option in Mourato et al
(2005) is to pay nothing annually and to bear the expected annual negative side effects (FISH,
HEALTH, and SEWAGE) if no actions are taken to counter the sewage overflows. The alternative
options refer to alternative descriptions of the good in question. One option may be costly but
results in a large reduction in the negative sewage side effects; another may be cheap but result
in a modest reduction in the negative sewage side effects.
The contingent ranking approach asks respondents to rank the ‗do nothing‘ and alternative
options from most to least preferred.
The contingent rating approach presents respondents with a series of single alternative
descriptions of the good. The respondent then has to rate the strength of their preference for
each description on a semantic or numeric scale.
2 (Hanley, 2001).