Publication Date:
2016-04-05
Description:
This paper develops a method that incorporates the public value for environmental co-benefits when a conservation buyer can purchase water quality credits based on non-market valuation results. We demonstrate this approach through an experiment with adult students in a classroom laboratory environment. Our application contributes to the study of individual preference and willingness to pay for co-benefits associated with the production of water quality credits in relation to the Ohio River Basin Trading Project. We use three different methods to elicit individuals' willingness to pay (WTP), including 1) a hypothetical referendum, 2) a real referendum lacking incentive compatibility and 3) a real choice with incentive compatibility. Methodologically, our WTP estimates suggest individuals are more sensitive to the cost changes and reveal the lowest value in the real choice with incentive compatibility. Practically, we find individuals value certain co-benefits and credits as public goods. Incorporating public value toward co-benefits may improve the overall efficiency of a water quality trading market. Based on our specification of a planner's welfare function, results suggest a 34% welfare improvement after identifying an optimal allocation of a buyer's budget across credits derived from agricultural management practices producing different portfolios of co-benefits. This article is protected by copyright. All rights reserved.
Print ISSN:
0043-1397
Electronic ISSN:
1944-7973
Topics:
Architecture, Civil Engineering, Surveying
,
Geography
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