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Accounting for implicit and explicit payment vehicles in a discrete choice experiment

Talpur, Musharaf A., Koetse, Mark J., Brouwer, Roy
Journal of environmental economics and policy 2018 v.7 no.4 pp. 363-385
coastal zone management, models, travel, willingness to pay
This study estimates the benefits of beach quality improvements, using travel costs as an implicit and entrance fee as an explicit payment vehicle in two otherwise identical labelled discrete choice site selection models. Including entrance fee as an explicit payment vehicle in addition to implicit travel costs is expected to affect beach visitors’ preferences and willingness to pay (WTP) since travel costs only are not expected to measure maximum WTP. Convergent validity of preference parameters and WTP derived from the two identical discrete choice experiments (DCEs) is tested using a split-sample approach and specifying a mixed logit choice model. Both preferences and scale parameters are significantly different between the two samples. As expected, mean WTP values are higher when an explicit entrance fee is included in the DCE. Our results suggest that implicit payment vehicles in choice experiments underestimate welfare changes. Beach visitors’ positive WTP holds promise for the introduction of economic instruments such as entrance fees to support the financial sustainability of improved beach management.