Validity of Willingness to Pay: hypothetical versus actual payment

Abstract

Questions concerning the criterion validity of contingent valuation studies have been raised for years. However, the few examples that exist concentrate on willingness to pay (WTP) for goods like chocolate bars, where a market exists. This article examines the criterion validity of WTP for treated mosquito nets (TMNs) in Gujarat, India. Three hundred households, in 20 villages, were interviewed twice within one month. The first interview ascertained maximum hypothetical WTP for one TMN using a bidding format with an open-ended final question, along with questions about the socio-economic and health factors that were likely to influence demand. The second interview reminded the respondents about TMNs and asked whether they would be willing to buy one for Rs75 (the modal value). If so, they were invited to buy as many TMNs as desired for their household. Analysis is based on a 2 � 2 contingency table with estimates of the sensitivity and specificity of the hypothetical WTP. At an aggregate level, there is no discrepancy between hypothetical and observed WTP, although there was considerable variation amongst individuals. Sensitivity was 62% and specificity 67%. It is concluded that these WTP estimates are robust at the population level but less so at the individual level. Further research is required to examine the determinants of change in household behaviour between hypothetical and actual WTP.

Households’ Willingness to Pay for Health Microinsurance and its Impact on Actual Take-up: Results from a Field Experiment in Senegal

“…We also find that 62 per cent of heads who opted for MHO insurance had a WTP greater than or equal to the contribution actually charged by the MHO they selected. This proportion is in line with Bhatia and Fox-Rushby (2003), who find that 66 per cent of agents have a WTP larger or equal to the value of the treated mosquito net that they actually bought. Such similarities are interesting to notice: bed nets, a one-off expenditure, are not comparable to the health microinsurance product that requires monthly contributions.…”

“…However, after calibrating data using qualitative and certainty scales, any such differences turn out to be insignificant. Bhatia and Fox-Rushby (2003) found no discrepancy at the aggregate level between hypothetical WTP elicited through a bidding game method and actual demand for treated mosquito nets in Gujarat, India. Conversely, Onwujekwe, Hanson and Fox-Rushby (2005) detect relevant divergences between three contingent valuation methods (bidding game, among others) and actual WTP for insecticide-treated bed nets in Nigeria and analyse the causes of such divergences.…”

GET MORE, PAY MORE? An elaborate test of construct validity of willingness to pay per QALY estimates obtained through contingent valuation

“…This twostep approach was applied to arrive at a more precise and robust estimate of the maximum WTP.A combination of WTP elicitation methods, although in different settings, was applied before (e.g. Bhatia and Fox-Rushby, 2003;Cameron and Quiggin, 1994;Johnson et al, 2000).…”

Reliability and Validity of Hypothetical Scenarios for Estimating Willingness to Pay (Wtp) Per Quality Adjusted Life Year (Qaly) in Indonesia Setting

“…Despite the advantages of the WTP method compared with other approach, uncertainties about reliability and validity have thus limited its application in health care decision-making [14]. WTP study must be designed carefully and accounted for culturally specific issues.…”

“…Individuals may have preferences for health intervention irrespective to the magnitude of the gain. Moreover, it is difficult for people to make these informed choices and that surveys asking people to state their preference for A versus B are hypothetical [14]. However, there is a clear need for a ceiling threshold, and more importantly, the threshold should be introduced on the basis of empirical evidence on societal values.…”