Sensitivity to scale in contingent valuation: the importance of the budget constraint.
Richard D Smith;
(2005)
Sensitivity to scale in contingent valuation: the importance of the budget constraint.
Journal of health economics, 24 (3).
pp. 515-529.
ISSN 0167-6296
DOI: 10.1016/j.jhealeco.2004.08.002
The possible insensitivity of willingness-to-pay (WTP) values to changes in scale continues to cause concern within the contingent valuation (CV) literature. Although several reasons for this phenomenon have been suggested, empirical evidence both supports and refutes insensitivity. This paper presents data that suggest that insensitivity may be significantly determined by the individual's budget constraint: the higher the proportion of income the expressed WTP represents, the greater the insensitivity of that WTP to changes in the scale of the good, irrespective of changes in underlying marginal utility. The methodological implication for CV studies in health care is outlined.
| Item Type | Article |
|---|---|
| Keywords | *Budgets, *Financing, Personal, Great Britain, Health Expenditures, Humans, Income, Quality of Life, Research Support, Non-U.S. Gov't, Sensitivity and Specificity, Budgets, Financing, Personal, Great Britain, Health Expenditures, Humans, Income, Quality of Life, Sensitivity and Specificity |
| ISI | 228715000005 |