An Adding-Up Test on Contingent Valuations of River and Lake Quality

01 October 2014
By Dr. Kenneth Train et al.

This paper, forthcoming in Land Economics, tests for a contingent valuation (CV) study of a bundle of water quality improvements, whether the sum of the estimated willingness to pay (WTP) for each individual part of the package, evaluated incrementally, equals the estimated WTP for the entire bundle -- as implied by standard utility theory. This is the first application of the adding-up test using incremental parts and Carson and Groves' (2007) procedures to induce truthful respondents' answers. The test is failed, which implies that either the CV method did not elicit truthful answers or that respondents’ true preferences are inconsistent with standard utility theory.