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01/30/2014

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Greta Witter


In this paper, Casey, Kahn, and Rivas explore an important question: is non-use value dependent on income? By implementing a choice modeling experiment, the authors are able to indirectly extract the non-use value of the ecosystem. Survey respondents chose between several environmental risk scenarios, each with different non-use value associations. We found this methodology to be much more appropriate, given the context, than a more direct contingent valuation/willingness to pay experiment. Because the state of the environment is such a complex ‘good’ to value, a choice experiment is the best way to account for its multiple attributes.
In our group discussion, we found the way in which the authors used fuel, health, and education as compensation means to be particularly interesting. Recognizing that survey respondents primarily operate outside of the formal economy means that cash payments were irrelevant compensation for environmental damage. However, we still had questions about the relative values of these measures. Just how valuable is an extra year of education in a community where the opportunity sets are already so limited? Given that more than half of respondents had not received greater than an elementary education, can they be relied on to make rational economic decisions?
Our group also talked about the local respondents’ relatively positive perception of Petrobras. Large oil companies are often cast as dangerous profit-seeking machines, unconcerned with environmental consequences. And yet, Petrobras operations did not seem to scare or bother the ribeirinhos. We would have expected a community so dependent on the environment for their livelihoods to be particularly cognizant of Petrobras’s potential threats.

Lizz Platt

Are tourists willing to pay additional fees to protect corals in Mexico?
Group 7: Peter Partee, Elizabeth Platt, Sarah Knenlein, and Stephen Sims

Using contingent valuation, Casey, Brown, and Schehmann interviewed 400 tourists in the Riviera Maya to determine their willingness-to-pay to protect the coral reefs of the area. By using a discrete choice system, they presented tourists with one of two surveys. Results showed that 99.2% believed the corals reefs should be protected. However, only 84.7% were willing to pay a form of an entrance fee to protect the coral reefs. This discrepancy between those that value the natural resource and those willing to pay shows the issue of a free-rider problem seen in public goods. Those whom do not pay the fee still have access to the service the coral reefs provide. Many tourists unwilling to pay such an entrance fee cited their apprehensive of the Mexican government to appropriately use funds.

One option of collecting an entrance fee, estimated to total $100 to $400 million annually, cited in the paper is in the form of an airplane tax. However, tourists residing in Mexico or surrounding areas within driving distance are immune to a tax added to airplane fees. Cruise ship vacationers, also, would not pay the tax because they arrived in the area on a form of transportation other than airplanes. Thus, the estimate of $100 to $400 million annually is too high if these factors were not taken into account. An airplane tax, which is favored by Americans, appears to be have low costs in collection of the tax, but does not collect the tax from every tourist that vacations in the area, allowing the free-rider issue to persist.

Reviewing the data, the survey showed that 92.7% of the surveys were conducted in sunny weather compared to the 7.3% in cloudy or hazy weather. Our group questioned the significance of the weather when conducting the survey. Our best conclusion was that the state of the weather has the potential to have an effect on the respondents answer. If the weather is sunny and beautiful, respondents may be more likely to not see an issue with the environment making them less likely to pay to protect the coral reefs. In order to more accurately understand the significance between weather and response, the survey should be repeated in a larger variety of weather conditions.

The data also showed that scuba divers were willing to pay less than snorkelers. As a group, we discussed possible reasons for this difference in willingness-to-pay. On possible explanation is similar to the explanation given for those interviewed at the Yal-Ku Lagoon. The authors hypothesized that those interviewed after snorkeling in the Lagoon would be willing to pay more. However, the opposite was true and may be attributed to the current condition of the coral reefs. After seeing the poor condition, respondents may believe their money would have little to no impact. The same may be true for snorkeling versus scuba diving. Respondents that recently went scuba diving were closer to the coral reefs and had the opportunity to see more of the current condition. Snorkels, on the other hand, may not have witnessed such an up close encounter to the reef and have a stronger belief that their money can protect the coral reefs. Overall, however, our group did not fully understand the reasoning behind the strong difference in willingness-to-pay when comparing snorkelers and scuba divers.

Bayan Misaghi

Kingsley Mooney, Matt Ziemer, Mary Beth Benjamin, Bayan Misaghi

Our group discussed Casey et al. (2009) “Are tourists willing to pay additional fees to protect corals in Mexico?” In addition to the fees that tourists currently pay to visit and experience Mesoamerican Barrier Reef System, this paper aims to find how much more tourists are willing to pay into a coral trust fund to protect the environment that they are enjoying. The paper uses a contingent valuation method that tried to mitigate hypothetical bias and the “warm glow” effect. The contingent valuation method is controversial because some economists argue that responses in real life do not correspond with stated preferences in surveys—that an individual’s willingness to pay would be much less if they were actually paying. With the inclusion of the idea of “cheap talk” during the survey, however, it might be possible to mitigate this bias. The surveyors include these “cheap talk” lines in their survey to make tourists aware of the potential for bias and to solicit more honest/accurate answers.

Controlling for classic variables like age, income, gender, education level, etc. and visitor-specific variables like length of stay, knowledge of the Mesoamerican Barrier Reef System, nationality, etc. the researchers found from their non-parametric results that the average willingness to pay was roughly $42 with a lower-bound estimate (95% confidence) ranging from $36 to $49. The parametric results suggest that tourists would be willing to pay between $20 and $80. With over 5 million visitors passing through Cancun International Airport each year, the economic importance of these results can immediately be seen: between $100 and $400 million could possibly be collected to help preserve the coral reef.

Something that is interesting and that we did not discuss in class was some of the reasons tourists gave for not wanting to pay an extra fee. Some already paid entrance and exit fees and said that the Mexican Government should protect the corals even without the extra fee being paid. Others might be more willing to pay a fee to the Mexican Government but did not want to because they did not trust that the Government would use those collected fees properly. Some tourists think it is the businesses responsibility to spend money to protect the coral reef (of course, they did not consider that the extra expense would be passed along to the consumer). Also, there was a group of tourists that did not want to pay an extra fee to protect the corals because they did not think they were causing much harm to the environment.

Questions can be raised based purely on these protest bids. For example, if consumers knew that certain snorkeling companies spent money to protect the corals and as a result had higher tour fees would these consumers opt to tour with these companies instead of the cheaper alternatives that do not protect the corals? The question of a consumer choosing a more expensive environmentally friendly company over the alternative might be a more circuitous way to test willingness to pay that would mitigate hypothetical bias. Another potential aspect to investigate is if the “coral fund” were less ambiguous would the consumers be more or less willing to pay the extra fee?

Sophia M

A protest bid that arose in this article was that the coral reefs were believed to be a public good which allowed everyone “free and unlimited access.” Interestingly the follow-up to this notion usually was that therefore preservation efforts ought to be the Mexican Government’s responsibility. As we discussed in class, public goods often suffer from market failure. Government measures are often relied on to correct these failures. However, in the case of this survey, a large source of concern for those who were willing to pay to protect the reefs was an issue of faith in the Mexican Government to execute the task faithfully. In both cases perhaps some of the respondents are releasing responsibility of taking care of the reefs onto the government, the unwilling to pay more directly, and the willing to pay citing doubt in government ability as a possible escape from having to pay.

Secondly, a quarter of those interviewed in this survey were couples. I am not entirely sure how the surveys were carried out in this case, but perhaps could bias result from a greater degree of permanence that these respondents may feel in their answers—their partner will know how they answered in the survey, and the results may then follow them home? Perhaps a more sympathetic response will be fostered by this? Furthermore, facing the interviewer (my assumption W&L students on the beach?) rather than completing a survey with no faces or human interaction could be a changing factor when push comes to shove, and a fee must be paid in some form that will unlikely include a person who’s opinion of you may change to be accountable to.

Another topic of interest was the column in Table 8 that included percentages evaluating the friendliness of tourist activities, broken down into friendly, neutral, and unfriendly. I would be interested to learn what these categories reference. Were they self-reported, or did interviewers assess from the type of activities the interviewee reported they were at the reef to do? What classified as unfriendly activities? Were those being “friendly” in their activities more likely to pay, or more likely to try to take the protection of the reef into their own hands.

Lastly, the length of the survey is mentioned in the study. Length is broken up into two groups, a dummy variable of 1 or 0 for survey A or M. It is noted that statistically significant results were found supporting that longer survey times decreased the willingness to pay of respondents. This also seems to imply that however the ultimate method of collecting the fee for coral reef protection may come about, it needs to be brief for the tourists to cause as little resentment or frustration as possible. Protecting the reef may be important, but perhaps not as important to the tourist as his/her own time.

Corey Guen

Group 5: Jenny Bulley, Corey Guen, Kasey Cannon, Connor Hollenbeck, Blake Spencer

Our group discussed Casey, Kahn, and Rivas' use of a choice modeling experiment to challenge the general assumption that valuing the environment is a luxury good that cannot be afforded by the poor. The experiment was designed to isolate non-use value of the environment to subsistence farmers living on the Amazon, that is the value people associate with not consuming a resource, such as the rainforest or the river itself. The experiment had to acknowledge the fact that the normal form of compensation, money, would men little to subsistence farmers who participation in the market economy is extremely limited. Rather, the experiment had to convert compensation in less quantifiable resources such as improved education and healthcare or reductions in the difficulty of labor. The study settled on education, healthcare and fuel as the main forms of barter for increased risk for oil spills on the Amazon.

Our group raised several questions concerning the administering of the choice modeling experiment, primarily the difficulty in separating non-use value from "embedded value" in which the ribeirinhos do not distinguish between value attached to the fact that their livelihood directly correlates to the resource in question. Another question revolved around the nature of responses to the WTA (willingness to accept) questions posed to the subjects. Our group found it difficult to assume that the subjects would not answer with high requests for compensation were it offered to them in exchange for accepted risk. The people already assume the risk of oil spills on the Amazon, and are currently uncompensated for the risk, so naturally they would ask for as much as they thought they could get away with given the risk exists regardless of whether or not they were compensated. As the other group mentioned in their post, we were curious how education and healthcare translated into value for the subjects, and how it would be be implemented given the ultimate risk the subjects would be willing to accept.

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