Estimate Mean WTP using a Formula - Estimated Confidence Intervals - Economics Assignment Help

Assignment Task :

The following questions are based on the article by Loomis et al describing the South Platte River study. Please provide a written answer for each question and submit an Excel file showing your calculations for questions 5 & 6. Set up your answers similarly to the Montevideo exercise we did in the first hour.

1. How do the authors set up the hypothetical market for the study? (e.g. what approach is used?) What are the key challenges that they face specific to this study?

2. Describe how the bids were obtained. What type of WTP elicitation format was used? What strengths and weaknesses does this format have? Do you detect any issues with this survey relating to sample size and response rate from Table 1 (Loomis et al)?

3. What were the maximum and minimum bid amounts? Do these seem well designed given the responses shown in Table 2 (Loomis et al)? Why or why not?

4. Interpret the statistical results by first considering the significance of the estimated coefficients in Table 3 (Loomis et al). How many of the estimated coefficients were significant at the 5% level or higher? Do all the signs on the estimated coefficients make sense? Were additional explanatory variables considered? Why were these not included in the final model? 

5. The authors estimate mean WTP using a formula similar to but not the same as what we used in the lab exercise. However, what property does Eqn (2) share with our earlier formulas for WTP? Make your own calculate of mean WTP. Use Eqn (2) and the data in Table 3 but expand Eqn (2) to include covariates as described by the authors at the bottom of p111 (Loomis et al). Is your estimate close to what the authors get and within their estimated confidence intervals? (see Word file formulas page 7 and Excel formulas)

6. Next the authors extrapolate the results to the relevant population to get total benefit estimates, by considering three population aggregates. Using your estimate of mean WTP from #5 above, make the same calculations as in the Loomis et al. paper. Your values may be slightly different due to rounding error but should be close to those in the paper. How convincing is this aggregation approach? What pattern would you expect to see in WTP as one moves further away from the river?

In order to evaluate the validity of the study what types of issues should be considered? [Note: recall potential problems with the CVM approach from the text and class lecture and consult the text box on the Blue Ribbon panel on next page] Do any of these seem pertinent here? Were any actions taken to check on validity or to avoid bias or deal with other potential problems?

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