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Methods, Section 7
The Contingent Choice Method


Overview
The contingent choice method is similar to contingent valuation, in that it can be used to estimate economic values for virtually any ecosystem or environmental service, and can be used to estimate non-use as well as use values.  Like contingent valuation, it is a hypothetical method – it asks people to make choices based on a hypothetical scenario.  However, it differs from contingent valuation because it does not directly ask people to state their values in dollars.  Instead, values are inferred from the hypothetical choices or tradeoffs that people make. 

The contingent choice method asks the respondent to state a preference between one group of environmental services or characteristics, at a given price or cost to the individual, and another group of environmental characteristics at a different price or cost.  Because it focuses on tradeoffs among scenarios with different characteristics, contingent choice is especially suited to policy decisions where a set of possible actions might result in different impacts on natural resources or environmental services. For example, improved water quality in a lake will improve the quality of several services provided by the lake, such as drinking water supply, fishing, swimming, and biodiversity.  In addition, while contingent choice can be used to estimate dollar values, the results may also be used to simply rank options, without focusing on dollar values.

This section continues with some example applications of the contingent choice method, followed by a more complete technical description of the method and its advantages and limitations.
 


Hypothetical Scenario:
In the contingent valuation section, we used the case of a remote site on public land that provides important habitat for several species of wildlife. The management agency in charge of the area must decide whether to issue a lease for mining at the site.  Suppose that there are several possible options for preserving and/or using the site.  These include allowing no mining and preserving the site as a wilderness habitat area, and various levels and locations for the mining operation, each of which would have different impacts on the site.  Thus, several options must be weighed in terms of costs and benefits to the public.  Again, because the area is remote, few people actually visit it, or view the animals that rely on it for habitat.  Therefore, non-use values are the largest component of the value for preserving the site.
 
Why Use the Contingent Choice Method?
The contingent choice method was selected in this case because we want to value the outcomes of several policy options, and because non-use values are important.
 
Alternative Approaches:
Since non-use values are significant, and few people actually visit the site, other methods, such as the travel cost method, will underestimate the benefits of preserving the site.  In this case, contingent valuation methods might also be used.  However, because we need to value several levels of services, based on different scenarios, the survey questions might become quite complicated. 
 

Application of the Contingent Choice Method:
Because both contingent choice and contingent valuation are hypothetical survey-based methods, their application is very similar.  The main differences are in the design of the valuation question(s), and the data analysis.
 
Step 1:
The first step is to define the valuation problem.  This would include determining exactly what services are being valued, and who the relevant population is.  In this case, the resource to be valued is a specific site and the services it provides – primarily wildlife habitat.  Because it is federally owned public land, the relevant population would be all citizens of the U.S.
 
Step 2:
The second step is to make preliminary decisions about the survey itself, including whether it will be conducted by mail, phone or in person, how large the sample size will be, who will be surveyed, and other related questions.  The answers will depend, among other things, on the importance of the valuation issue, the complexity of the question(s) being asked, and the size of the budget. 

In-person interviews are generally the most effective for complex questions, because it is often easier to explain the required background information to respondents in person, and people are more likely to complete a long survey when they are interviewed in person.  In some cases, visual aids such as videos or color photographs may be presented to help respondents understand the conditions of the scenario(s) that they are being asked to value. 

In-person interviews are generally the most expensive type of survey.  However, mail surveys that follow procedures that aim to obtain high response rates can also be quite expensive.  Mail and telephone surveys must be kept fairly short, or response rates are likely to drop dramatically.  Telephone surveys are generally not appropriate for contingent choice surveys, because of the difficulty of conveying the tradeoff questions to people over the telephone.

In this hypothetical case, the researchers have decided to conduct a mail survey, because they want to survey a large sample, over a large geographical area, and are asking questions about a specific site and its benefits, which should be relatively easy to describe in writing in a relatively short survey.

 
Step 3:
The next step is the actual survey design.  This is the most important and difficult part of the process, and may take six months or more to complete.  It is accomplished in several steps.  The survey design process usually starts with initial interviews and/or focus groups with the types of people who will be receiving the final survey, in this case the general public.  In the initial focus groups, the researchers would ask general questions, including questions about peoples’ understanding of the issues related to the site, whether they are familiar with the site and its wildlife, whether and how they value this site and the habitat services it provides. 

In later focus groups, the questions would get more detailed and specific, to help develop specific questions for the survey, as well as decide what kind of background information is needed and how to present it.  For example, people might need information on the location and characteristics of the site, the uniqueness of species that have important habitat there, and whether there are any substitute sites that provide similar habitat. 

At this stage, the researchers would test different approaches to the choice question.  Usually, a contingent choice survey will ask each respondent a series of choice questions, each presenting different combinations and levels of the relevant services, as well as the cost to the respondent of the action or policy.  In this example, each choice might be described in terms of the site’s ability to support each of the important wildlife species.  Thus, people will be making tradeoffs among the different species that might be affected in different ways by each possible choice of scenario.

After a number of focus groups have been conducted, and the researchers have reached a point where they have an idea of how to provide background information, describe the hypothetical scenario, and ask the choice question, they will start pre-testing the survey.  Because the survey will be conducted by mail, it should be pretested with as little interaction with the researchers as possible. People would be asked to assume that they’ve received the survey in the mail and to fill it out.  Then the researchers would ask respondents about how they filled it out, and let them ask questions about anything they found confusing.  Eventually, a mail pretest might be conducted.  The researchers continue this process until they’ve developed a survey that people seem to understand and answer in a way that makes sense and reveals their values for the services of the site.

 
Step 4:
The next step is the actual survey implementation.  The first task is to select the survey sample.  Ideally, the sample should be a randomly selected sample of the relevant population, using standard statistical sampling methods.  In the case of a mail survey, the researchers must obtain a mailing list of randomly sampled U.S. citizens.  They would then use a standard repeat-mailing and reminder method, in order to get the greatest possible response rate for the survey.  Telephone surveys are carried out in a similar way, with a certain number of calls to try to reach the selected respondents.  In-person surveys may be conducted with random samples of respondents, or may use “convenience” samples – asking people in public places to fill out the survey.
 
Step 5:
The final step is to compile, analyze and report the results. The statistical analysis for contingent choice is often more complicated than that for contingent valuation, requiring the use of discrete choice analysis methods to infer willingness to pay from the tradeoffs made by respondents. 

From the analysis, the researchers can estimate the average value for each of the services of the site, for an individual or household in our sample.  This can be extrapolated to the relevant population in order to calculate the total benefits from the site under different policy scenarios.  The average value for a specific action and its outcomes can also be estimated, or the different policy options can simply be ranked in terms of peoples’ preferences.


How Do We Use the Results?
The results of the survey might show that the economic benefits of preserving the site by not allowing mining are greater than the benefits received from allowing mining.  If this were the case, the mining lease might not be issued, unless other factors override these results.  Alternatively, the results might indicate that some mining scenarios are acceptable, in terms of economic costs and benefits.  The results could then be used to rank different options, and to help select the most preferred option.
 

Case Study Examples of the Contingent Choice Method:
Case # 1—Landfill Siting in Rhode Island
 

The Situation

With its primary landfill nearing capacity, the State of Rhode Island was faced with the need to choose locations for new landfills, a highly controversial process.
 
The Challenge
Besides technical considerations, the State wanted to address the social and economic tradeoffs and values related to the location of a landfill.  In this way, State officials hoped to avoid some of the controversy associated with landfill siting.
 
The Analysis
Researchers at the University of Rhode Island conducted a contingent choice, paired comparison, survey.  The survey asked Rhode Island residents to choose between pairs of hypothetical sites and locations for a new landfill, described in terms of their characteristics.  The site comparisons described the natural resources that would be lost on a hypothetical 500 acre landfill site.  The location comparisons described the area surrounding the landfill.  Each comparison also gave the cost per household for locating a landfill at each hypothetical site or location.
 
The Results
The results of the survey were used by the State to predict how residents would vote in a referendum on different possible landfill locations.  First, 59 possible sites were selected, based on geological and public health criteria.  These sites were ranked using the contingent choice survey results, in order to come up with a short list of potential sites, which was further evaluated and narrowed down.  The final decision, based on geological, public health, public preferences, and political considerations, was to expand the existing landfill site.


Case # 2—Management of the Peconic Estuary System
 
The Situation
The environmental and natural resources of the Peconic Estuary System—the bay waters, beaches, wetlands, ecosystems, habitats, and parks and watershed lands—provide many services to the public.  The Peconic Estuary Program was established under the National Estuary Program, to create a conservation and management plan for the environment and natural resources of the Estuary. 
 
The Challenge 
In order to develop a management plan that best serves the public, information was needed about the value that the public holds for the ecosystem services of the Estuary. 
 
The Analysis
Several studies were conducted to estimate the uses and economic values associated with the Estuary, including a contingent choice survey to estimate the relative preferences and economic values that residents and second homeowners have for preserving and restoring key natural and environmental resources: open space, farmland, unpolluted shellfish grounds, eelgrass beds, and intertidal salt marsh. 
 
The Results
Early discussions revealed that the public has a strong attachment to environmental and amenity resources of the Peconic Estuary, even if they do not use these resources directly. Most respondents to the survey (97 percent) supported at least one hypothetical action to protect  resources, and indicated they would financially support such actions.  The relative priorities of respondents for protecting natural resources, in order, were for farmland, eelgrass, wetlands, shellfish, and undeveloped land.  The estimated per acre dollar values were about $13 thousand for undeveloped land, $30 thousand  for unpolluted shellfish grounds, $54 thousand for saltmarsh, $66 thousand for eelgrass and $70 thousand for farmland.   The survey results indicated that the resource priorities, or relative values of resources, are more reliable than are the dollar estimates of values, and thus the researchers recommended that relative values, rather than dollar values, be used in the process of selecting management actions. 


 

Summary of the Contingent Choice Method
The contingent choice method is similar to contingent valuation, in that it can be used to estimate economic values for virtually any ecosystem or environmental service, and can be used to estimate non-use as well as use values.  Like contingent valuation, it is a hypothetical method – it asks people to make choices based on a hypothetical scenario.  However, it differs from contingent valuation because it does not directly ask people to state their values.  Instead, values are inferred from the hypothetical choices or tradeoffs that people make. 

Contingent choice, also referred to as conjoint analysis, was developed in the fields of marketing and psychology to measure preferences for different characteristics or attributes of a multi-attribute choice.  For example, a marketing study might ask potential consumers to state which of two hypothetical cars they prefer, with each car described in terms of its characteristics, such as price, roominess, reliability, safety, fuel economy, power and so on.  Statistical techniques are then used to establish a relation between the characteristics and the individual's preferences.  As long as one of the characteristics of the good is price, it is possible to derive the willingness to pay for changes in the levels of the good's other characteristics.

The contingent choice method asks the respondent to state a preference between one group of environmental services or characteristics, at a given price or cost to the individual, and another group of environmental characteristics at a different price or cost.  Because it focuses on tradeoffs among scenarios with different characteristics, contingent choice is especially suited to policy decisions where a set of possible actions might result in different impacts on natural resources or environmental services.  Thus, it is particularly useful in valuation of improvements to ecosystems, given that several service flows are often simultaneously affected.  For example, improved water quality in a lake will improve the quality of several services provided by the lake, such as drinking water supply, fishing, swimming, and biodiversity.  In addition, while contingent choice can be used to estimate dollar values, the results may also be used to simply rank options, without focusing on dollar values.


 

Applying the Contingent Choice Method
 
There are a variety of formats for applying contingent choice methods, including:
  • Contingent Ranking—Contingent ranking surveys ask individuals to compare and rank alternate program outcomes with various characteristics, including costs. For instance, people might be asked to compare and rank several mutually exclusive environmental improvement programs under consideration for a watershed, each of which has different outcomes and different costs. Respondents are asked to rank the alternatives in order of preference. 

  •  
  • Discrete Choice—In the discrete choice approach, respondents are simultaneously shown two or more different alternatives and their characteristics, and asked to identify the most preferred alternative in the choice. 

  •  
  • Paired Rating—This is a variation on the discrete choice format, where respondents are asked to compare two alternate situations and are asked to rate them in terms of strength of preference.  For instance, people might be asked to compare two environmental improvement programs and their outcomes, and state which is preferred, and whether it is strongly, moderately, or slightly preferred to the other program.
Whatever format is selected, the choices that respondents make are statistically analyzed using discrete choice statistical techniques, to determine the relative values for the different characteristics or attributes.  If one of the characteristics is a monetary price, then it is possible to compute the respondent’s willingness to pay for the other characteristics.

As with contingent valuation, in order to collect useful data and provide meaningful results, the contingent choice survey must be properly designed, pre-tested, and implemented.  However, because responses are focused on tradeoffs, rather than direct expressions of dollar values, contingent choice may minimize some of the problems associated with contingent valuation.  Often, relative values are easier and more natural for people to express than absolute values.

As with contingent valuation, a good contingent choice study will consider the following in its application:
 

  • Before designing the survey, learn as much as possible about how people think about the good or service in question.  Consider people’s familiarity with the good or service, as well as the importance of such factors as quality, quantity, accessibility, the availability of substitutes, and the reversibility of the change.
  • Determine the extent of the affected populations or markets for the good or service in question, and choose the survey sample based on the appropriate population.
  • The choice scenario must provide an accurate and clear description of the change in  environmental services associated with the event, program, investment, or policy choice under consideration.  If possible, convey this information using photographs, videos, or other multi-media techniques, as well as written and verbal descriptions.
  • The nature of the good and the changes to be valued must be specified in detail, and it is important to make sure that respondents do not inadvertently assume that one or more related improvements are included. 
  • The respondent must believe that if the money was paid, whoever was collecting it could effect the specified environmental change.
  • Respondents should be reminded to consider their budget constraints.
  • Specify whether comparable services are available from other sources, when the good is going to be provided, and whether the losses or gains are temporary or permanent.
  • Respondents should understand the frequency of payments required, for example monthly or annually, and whether or not the payments will be required over a long period of time in order to maintain the quantity or quality change.  They should also understand who would have access to the good and who else will pay for it, if it is provided.
  • In the case of collectively held goods, respondents should understand that they are currently paying for a given level of supply.  The scenario should clearly indicate whether the levels being valued are improvements over the status quo, or potential declines in the absence of sufficient payments.
  • If the household is the unit of analysis, the reference income should be the household’s, rather than the respondent’s, income. 
  • Thoroughly pre-test the questionnaire for potential biases. Pre-testing includes testing different ways of asking the same question, testing whether the question is sensitive to changes in the description of the good or resource being valued, and conducting post-survey interviews to determine whether respondents are stating their values as expected. 
  • Include validation questions in the survey, to verify comprehension and acceptance of the scenario, and to elicit socioeconomic and attitudinal characteristics of respondents, in order to better interpret variation in responses across respondents.
  • Surveys can be conducted as in-person interviews, telephone interviews or mail surveys.  The in-person interview is the most expensive survey administration format, but is generally considered to be the best approach, especially if visual materials are to be presented.  Telephone surveys are generally not effective for presenting contingent choice questions.
  • Interview a large, clearly defined, representative sample of the affected population.
  • Achieve a high response rate and a mix of respondents that represents the population.
  • Whatever survey instruments and survey designs are used, and whatever response rate is achieved, make sure that survey results are analyzed and interpreted by professionals before making any claims about the resulting dollar values.

Advantages of the Contingent Choice Method
 

  • The contingent choice method can be used to value the outcomes of an action as a whole, as well as the various attributes or effects of the action.
  • The method allows respondents to think in terms of tradeoffs, which may be easier than directly expressing dollar values. The tradeoff process may encourage respondent introspection and make it easier to check for consistency of responses.  In addition, respondents may be able to give more meaningful answers to questions about their behavior (i.e. they prefer one alternative over another), than to questions that ask them directly about the dollar value of a good or service or the value of changes in environmental quality.  Thus, an advantage of this method over the contingent valuation method is that it does not ask the respondent to make a tradeoff directly between environmental quality and money.
  • Respondents are generally more comfortable providing qualitative rankings or ratings of attribute bundles that include prices, rather than dollar valuation of the same bundles without prices, by de-emphasizing price as simply another attribute.
  • Survey methods may be better at estimating relative values than absolute values.  Thus, even if the absolute dollar values estimated are not precise, the relative values or priorities elicited by a contingent choice survey are likely to be valid and useful for policy decisions.
  • The method minimizes many of the biases that can arise in open-ended contingent valuation studies where respondents are presented with the unfamiliar and often unrealistic task of putting prices on non-market amenities.
  • The method has the potential to reduce problems such as expressions of symbolic values, protest bids, and some of the other sources of potential bias associated with contingent valuation. 

Issues and Limitations of the Contingent Choice Method 

  • Respondents may find some tradeoffs difficult to evaluate, because they are unfamiliar.
  • The respondents’ behavior underlying the results of a contingent choice study is not well understood.  Respondents may resort to simplified decision rules if the choices are too complicated, which can bias the results of the statistical analysis.
  • If the number of attributes or levels of attributes is increased, the sample size and/or number of comparisons each respondent makes must be increased.
  • When presented with a large number of tradeoff questions, respondents may lose interest or become frustrated.
  • Contingent choice may extract preferences in the form of attitudes instead of behavior intentions.
  • By only providing a limited number of options, it may force respondents to make choices that they would not voluntarily make.
  • Contingent ranking requires more sophisticated statistical techniques to estimate willingness to pay.
  • Translating the answers into dollar values, may lead to greater uncertainty in the actual value that is placed on the good or service of interest.
  • Although contingent choice has been widely used in the field of market research, its validity and reliability for valuing non-market commodities is largely untested.

 
 
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