Reconciling revealed and stated measures for willingness to pay in recreation by building a probability model

TL;DR

This paper develops a probabilistic model to compare revealed and stated willingness to pay for recreation, demonstrating its effectiveness through a pilot study on environmentally enhanced sites.

Contribution

It introduces a simple probabilistic approach to reconcile stated and revealed preferences for travel-related willingness to pay.

Findings

Revealed and stated willingness to pay estimates closely matched in the pilot.

Population adjustments improved the comparability of preferences.

The model facilitates easier comparison between different preference measures.

Abstract

The consumers' willingness to pay plays an important role in economic theory and in setting policy. For a market, this function can often be estimated from observed behavior -- preferences are revealed. However, economists would like to measure consumers' willingness to pay for some goods where this can only be measured through stated valuation. Confirmed convergence of valuations based on stated preferences as compared to valuations based on revealed preferences is rare, and it is important to establish circumstances under which one can expect such convergence. By building a simple probabilistic model for the consumers' likelihood of travel, we provide an approach that should make comparing stated and revealed preferences easier in cases where the preference is tied to travel or some other behavior whose cost can be measured. We implemented this approach in a pilot study and found an estimate of willingness to pay for visiting an environmentally enhanced recreational site based on actual travel in good agreement with an estimate based on a survey using stated preferences. To use the probabilistic model we used population statistics to adjust for the relevant duration and thus compare stated and revealed responses.