Valuing the Environment Via Bidding Games: A Psychological Perspective
How to place a monetary value on the environment and manmade environmental change represents a major methodological problem. The merits of using a monetary scale for valuing environmental goods are that it is familiar to all, can be related to wealth, and, if successfully implemented, can be combined with monetary information from actual costs. Assigning monetary values to "goods" not bought and sold in the marketplace is difficult at best. Several methods are available: direct costing, indirect costing, and bidding games. Direct costs measure the cost of damages associated with environmental change. Indirect costs measure values associated with environmental change (e.g., change in property values). Neither are seen as adequate for measuring net or aggregate social value for public policy decisions. Bidding games are seen as the most appropriate method. Based on the concept of consumer surplus, bidding games are said to measure the maximum willingness to pay (WTP) for a good (e.g., environmental change). Four valid games can be played: 1) WTP to get a positive environmental change; 2) WTP to prevent a negative environmental change; 3) minimum willingness to accept (WTA) in compensation to forego a positive environmental change; and 4) WTA to put up with a negative environmental change. Close examination of the assumptions of these games reveals two important considerations: perceived rights and perceived positive or negative nature of the proposed change. For example, if a respondent is asked to state his/her maximum WTP to prevent the construction of a power plant, the game is valid only if 1) the respondent agrees that he/she has no right to the current state and has to "purchase" the right, and 2) that the construction is perceived by the respondent as a negative change. Many environmental changes are, in fact, ambiguous with respect to rights and positive or negative quality. This is often the case across a sample of area residents. Forcing the respondent to play the wrong game (from his/her perspective) results in invalid data. This paper views the bidding games procedure as basically a socialpsychological experiment; accordingly, many of the concerns associated with such experiments are relevant here. Sampling of respondents is a key issue. To assure an accurate measure of social value for an area (town, region, state, etc.), a representative sample of respondents must give their estimates. Stimuli or the thing people are asked to bid on must be representative as well. Actual environmental settings (a forest or stream) are not always representative in the sense that the change itself cannot be represented. Photographs and verbal descriptions may suffice, depending on specific circumstances, and, in some cases, may be superior to the "real thing." Issues of bid format are reviewed. Formats that restrict the response range, say in dollars, have the advantage of structure, but may lead the respondent. Open-ended formats may offer less reliable responses and do not represent a typical market situation where a specific price is proposed. The bid itself is viewed as a stated behavioral intention, which mayor may not correlate highly with actual payment (behavior). Accordingly, the paper examines the relationship variables between attitude and behavior and concludes that the games could be designed to maximize this correlation. A review of interviewer-respondent biases was made. It was concluded that no insurmountable problems were present so long as these variables of interpersonal dynamics were taken into consideration. Psychometric concerns were explored, asking the basic question: Are the "dollars" of the response scale equivalent to the dollars exchanged for goods in the marketplace? It was concluded that the scales of response undoubtedly have interval properties, but no evidence exists to suggest the presence of ratio properties. Validation studies must be done. A final assessment of bidding games must await the future. The techniques already hold much promise. Because bidding games are very new, it would be premature to judge them as not adequate. At this point, they appear to be the best available method for valuing environmental change.
- Research Organization:
- Pacific Northwest National Lab. (PNNL), Richland, WA (United States)
- Sponsoring Organization:
- USDOE
- DOE Contract Number:
- DE-AC06-76RL01830
- OSTI ID:
- 1123894
- Report Number(s):
- PNL-2950
- Country of Publication:
- United States
- Language:
- English
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