OLS versus ML estimation of non-market resource values with payment card interval data

Abstract

Contingent valuation methods (CVM) have been shown to be potentially very useful for eliciting information about demands for non-market goods. We assess the sensitivity of “payment card” CVM results to the researcher’s choice of estimation method. Empirical payment card data are used in both (a) a naive ordinary least squares (OLS) procedure employing interval midpoints as proxies for the true dependent variable, and (b) an efficient maximum likelihood (ML) procedure which explicitly accommodates the intervals. Depending upon the design of the payment card, OLS can yield biased parameter estimates, misleading inferences regarding the effects of different variables on resource values, and biased estimates of the overall resource value.

Publication
Journal of Environmental Economics and Management 17(3) 230-246

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