A note on the warm glow of giving and scope sensitivity in
contingent valuation studies
S.M. Chilton a,*, W.G. Hutchinsonb a
Environment Department, University of York, Heslington, York, YO10 5DD, UK
b
Department of Agricultural and Food Economics, The QueenÕs University of Belfast, Belfast, N Ireland, BT9 5PX, UK
Received 21 August 1998; received in revised form 17 April 2000; accepted 25 May 2000
Abstract
This note develops a behavioral framework to classify individual contingent valuation (CV) respondents in terms of the warm glow and altruistic motives in their WTP responses. We suggest that at least ®ve possible behavioral categories for CV responses may exist, depending on the type of underlying preferences and whether respondents are satiated or non-satiated with respect to the good. An empirical example suggests that the warm glow motive may be present in the majority of bids, although its presence does not necessarily preclude scope
sensitivity to the quantity/quality of an environmental good. Ó 2000 Elsevier Science B.V. All
rights reserved.
PsycINFO classi®cation:4070
JEL classi®cation:H49
Keywords:Warm glow; Contingent valuation; Scope sensitivity
www.elsevier.com/locate/joep
*Corresponding author. Tel.: +44-1904-432996.
E-mail address:[email protected] (S.M. Chilton).
1. Introduction
Contingent valuation (CV) is a stated preference method for estimating the ``worth'' ± in terms of money ± of a public good to an individual. The technique is most widely used to value environmental public goods but is becoming increasingly popular in other ®elds such as health. Underlying this method is the assumption that respondents are able to construct unique economic values for these goods by referring to their own well-constructed and known preference orderings. Furthermore, and of particular impor-tance to this paper, they are assumed to act in a ``market-like'' manner, treating the transaction as equivalent to the purchase of a consumption good. As such, their willingness to pay (WTP) should be ``scope-sensitive'' i.e., responsive to, diering quantities and qualities of the public environ-mental good.
This assumption that respondents treat the purchase of the environmental good in the same manner as they view the purchase of a private consumer good is not without controversy. Kahneman and Knetsch (1992) ± based on AndreoniÕs (1989, 1990) adjustments to the earlier models of Bergstrom, Blume and Varian (1986) and Cornes and Sandler (1986) regarding the pri-vate provision of public goods ± raised the question as to whether respon-dents treated their request for a WTP amount as they would a donation to charity. They termed this the purchase of ``moral satisfaction''. Using the terminology of Andreoni, this is known as ``warm glow''.
these different underlying preferences can lead to ®ve behavioral possibilities into which CV responses may be classi®ed.
2. Extending CV respondents' utility and expenditure functions to include warm glow bene®ts
Andreoni (1989, 1990) outlines the general case (i.e., mixed preferences) direct utility function that takes account of these potential dierent under-lying preferences. In the case of an environmental good we have
Ui Ui Xi;E;gi; 1
where Ui is the utility function of individual i (i1;. . .;n), Xi the private
goods consumption of individuali,Ethe level of provision of (services from) the environmental good and gi is the individualÕs donation to its provision.
The ``special'' cases follow very simply. In the case of pure altruism, there would be no warm glow bene®ts from giving to the public good andgi
dis-appears from the utility function as a separate argument, entering only as part of the level of public bene®ts [E]. Meanwhile, in the case of pure egoism where private warm glow bene®ts are the only bene®ts to the individual,giis
included as an argument andEis excluded.
In order to measure the monetary value of an environmental good (in the case of a CV study, more strictly an environmental change), the direct utility function is re-speci®ed in the form of a household expenditure function (Randall & Stoll, 1983; Hoehn, 1991). Household i derives utility from consumption of market goods Xi, and environmental services, E, i.e.,
Ui Xi;E. The value of environmental change for the general case in Eq.
(1) can thus be re-speci®ed (Eq. (2)) to allow for the presence of warm glow giving in the expenditure committed to a proposed increase in supply of the good. Eq. (2) implies an increase in the public bene®ts, i.e.,E0toE1whereE0 is the public bene®t enjoyed at the initial level of the good
HCi m0i ÿe E
1
;gi;U
0
i; 2
where
m0i e E0;gi;U
0
i:
marginal value of 0 for any additional increments (``open'' satiation). In the extreme case, this satiation may be ``closed'', in the sense that additional increments have a negative marginal value. Combinations of single type or mixed preferences and satiation or non-satiation could result in different behavioral classi®cations, as will be seen in the next section.
3. Potential behavioral classi®cation CV responses
Considering the general case speci®ed in the equations above, an indi-vidualÕs utility may be related to the level of the altruistic argument (E). This scope sensitivity can be tested for quite simply by varying the level of pro-vision ofE and then observing if this affects WTP. Conventional economic theory predicts that a positive relationship should normally exist between WTP and an improvement or quantity increase in a good, provided that the individual is in the range of non-satiation. However, the theory underlying donations to privately supplied public goods suggests the possibility that WTP may not always be sensitive to scope. An individualÕs utility may also be related to gi (in addition to, or instead of E) in its role as provider of
private, warm glow bene®ts. Thus, depending on the underlying preferences of the individual, there may be no warm glow component in their WTP, their WTP may be made up partially of warm glow WTP or, ®nally, completely of warm glow WTP. The amount of warm glow preference (gi) and non-satiated
and satiated altruistic preferences (E) in an individual WTPÕs will determine how the CV response is classi®ed.
These possible classi®cations are de®ned by considering the response of WTP to a scope-sensitivity test together with individual propensities for warm glow giving. The result of this interdependence is shown in Table 1.
Table 1
Classi®cation of CV responses resulting from dierent underlying preferences
gi E
Scope-responsive WTP Non-scope responsive WTP
No warm glow WTP motive A B
Pure altruists, non-satiated Pure altruists, satiated
Partial warm glow WTP motive C D
Impure altruists, non-satiated Impure altruists, satiated
Complete warm glow WTP motive ) E
4. Empirical evidence of the presence of dierent underlying preferences
We now report some empirical evidence in support of the predictions outlined in Table 1. As part of a wider CV study (Hutchinson, Chilton & Davis, 1995), a sample of 134 respondents were each asked to bid for 10% and 20% increases in the level of forestry in Ireland. This provides the scope-sensitivity test. In addition, a self-reported warm glow disembedding ques-tion (based on Chestnut & Rowe, 1990; Rowe, Schulze, Shaw, Schenk & Chestnut, 1991; McClelland et al., 1992) was administered to each respon-dent:
Qu: You have just been asked in Q10(i) to state the money amount your household would be willing to pay for the 10% expansion oer. Some people say they have diculty in separating what they would give for a stated programme from a donation to all good causes, which is under-standable, but would you say the amount you stated was:
JUST FOR THE STATED TREE-PLANTING PROGRAMME, PARTLY FOR THE STATED TREE-PLANTING PROGRAMME AND PARTLY A GENERAL CONTRIBUTION TO ALL ENVI-RONMENTAL CAUSES,
MOSTLY A CONTRIBUTION TO ALL ENVIRONMENTAL CAUSES,
OTHER (PLEASE SPECIFY).
About what % of your cash bid was just for this stated tree-planting pro-gramme?
While such questions have to be interpreted with caution since they may ``suggest'' an answer to respondents,1we attempted to minimize this danger by providing a complete range of possible responses. We also oered
NONE SOME HALF MOST ALL
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
(Please circle)
1
respondents the opportunity to indicate the approximate intensity of both motives through the use of a percentage scale.
Table 2 contains the classi®cation of our CV responses in terms of their responsiveness to scope (E) and the stated warm glow giving motive (gi) of
the 110 usable responses.
The empirical evidence in Table 2 suggests that the majority of respon-dents in this study were impurely altruistic with respect to the environmental good on oer, although evidence exists to suggest that some respondents are special cases. This is entirely consistent with the predictions of Andreoni (1989, 1990). Further, while most respondents appear to be in the range of non-satiation, there is some evidence of satiation.
5. Concluding comments
This note set out to identify, and subsequently examine empirically, the potential types of CV responses that may arise if warm glow giving is present. Evidence from economic theory and anecdotal evidence from CV ®eld studies suggest that warm glow may be a signi®cant feature within contingent markets. Champ, Bishop, Brown and McCollum (1997) go so far as to suggest a particular type of CV mechanism which would allow warm glow to be included and accounted for in the response. This particular study suggests that the majority of respondents were impurely altruistic with respect to the aorestation programmes. This diversity of preferences is, as shown, legiti-mate and is not of concern in and of itself.
Nevertheless, in the real world, many environmental goods are provided publicly (i.e., through government, lump-sum taxation). Such taxation is assumed not to contain warm glow. However, as can be seen from the above results, if the good is provided privately then warm glow preferences are activated in the large majority of respondents. Chilton and Hutchinson Table 2
Empirical classi®cation of respondents in terms of their underlying preferences
Category of CV response Number
A 12
B 2
C 46
D 26
(1999) point out in more detail the dangers for bene®t-cost tests arising from the transfer of contingent values generated in a scenario in which the envi-ronmental good is privately provided and publicly consumed to situations where the good is publicly provided and publicly consumed. This note sug-gests that their concerns are well placed, given the stated presence of warm glow in these particular contingent values.
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