Article
The Scope Trials: Variation in sensitivity to scope and WTP with directionally bounded utility functions
Journal of Environmental Economics and Management
(2010)
Abstract
Sensitivity to scope refers to the property that willingness to pay for an environmental amenity is an increasing function of the scope of the amenity. Measurements of the degree of sensitivity to scope are commonly proposed as a test for the reliability of contingent valuation studies. We evaluate the traditional scope test using neoclassical utility functions that are directionally bounded. We provide a formal definition of sensitivity to scope, and show that directionally bounded utility functions can produce arbitrarily small degrees of sensitivity to scope. We conclude that a failure to satisfy existing scope tests should not be used as a prima facie basis for rejecting contingent valuation studies. This does not imply that small degrees of sensitivity to scope should always be viewed as acceptable. Rather, the results of scope tests should be considered more carefully, with attention given to the substitutability of market and non-market goods.
Keywords
- Willingness to pay,
- Sensitivity to scope,
- Contingent valuation,
- Consumer utility,
- Substitution
Disciplines
Publication Date
May 1, 2010
DOI
10.1016/j.jeem.2009.06.003
Citation Information
Edoh Y. Amiran and Daniel A. Hagen. "The Scope Trials: Variation in sensitivity to scope and WTP with directionally bounded utility functions" Journal of Environmental Economics and Management Vol. 59 Iss. 3 (2010) p. 293 - 301 Available at: http://works.bepress.com/edoh_amiran/4/