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Doctoral Thesis
2015

Personality-based approach to environmental valuation

Abstract (English)

One methodological shortcoming of the contingent valuation method (CVM) is that it allows for both accidental and deliberate misreporting of individual preferences. In CVM surveys the preferences of people for an environmental improvement are measured in terms of their willingness to pay (WTP) to get that improvement or the project that yields it. The WTP respondents state in CVM interviews is interpreted as the monetary equivalent of the utility they expect from the environmental improvement in question. Myriads of attempts have been made to identify and eliminate those elements of a CVM survey which might induce respondents to deviate from stating their true willingness to pay in a CVM interview. Little attention has been paid, however, to the psychological characteristics of survey respondents, which may as well play an important role in this context. In particular, insights from modern personality psychological research which has already been applied in the recent decades in the field of behavioral economics have not been given much consideration in the context of environmental valuation. Therefore, this study scrutinizes the influence of personality traits on WTP statements from both a theoretical and an empirical point of view. Of special interest is the usefulness of personality traits for detecting biases in WTP answers. Personality traits are fundamental human dispositions, which influence people’s typical behavior, thoughts and feelings. In personality psychology today, it is commonly accepted that personality traits of human beings can be represented by five global personality domains, namely neuroticism, extraversion, openness to experience, agreeableness, and conscientiousness. Neuroticism represents the tendency of individuals to experience negative emotions, such as fear, sadness, embarrassment, and anger. Extraversion represents sociability, energeticness, and the tendency of individuals to experience positive emotions. Openness to experience represents the interest of individuals in the engagement with new experiences and impressions. Agreeableness incorporates the characteristics of empathy, cooperation, and care in interpersonal situations. Conscientiousness represents the tendency of being thorough, reliable, well-organized, and hard-working and hence describes the degree of self-control and purposefulness. These are the underlying concepts of the Big Five personality model (BFM) which forms the theoretical basis for this study. When it comes to the economic valuation of environmental goods, neuroticism and extraversion are suspected to distort respondents’ WTP statements. In this study the following hypotheses are analyzed: Neurotic respondents are expected to report WTP answers which are overshadowed by different sorts of negative emotions resulting in an understatement of their WTP answers. Respondents who score high on extraversion are expected to overstate their WTP responses in comparison to their true WTP because of their optimism and friendliness. Openness to experience and agreeableness, on the other hand, are not expected to cause biases contained in WTP answers. Yet, systematic relationships between the two personality domains and stated WTP are anticipated because these two domains are likely to be related to individual preferences for environmental projects. Positive association between openness to experience and stated WTP is expected because open individuals, who prefer novelty and are more ready to adopt new activities, may expect higher benefits from the project than respondents who score low on the openness scale. Agreeable respondents, who are fundamentally altruists, are expected to value environmental projects higher than respondents with a low level of agreeableness. As a consequence, a positive relationship between agreeableness and WTP answers is expected. Conscientiousness is not expected to influence stated WTP because the tendencies of being well-organized and hard-working appear to be not relevant to the economic valuation of environmental goods. The derived theoretical predictions of the influence of the five personality domains on stated WTP were verified in a practical CVM survey conducted in northern Thailand to assess the social benefits accruing to a lowland community in a watershed in Chiang Mai province from a project aiming at the improvement of their household water supply. The total of 570 personal interviews were conducted. Since the elicitation question format is generally suspected to influence CVM results, the sample was split to test the influence of personality in two elicitation question formats, namely the dichotomous choice elicitation format (DC) where respondents were asked if they would support the proposed project if they had to pay a surcharge of a specified amount on their water bill (N=345), and the payment card format (PC) where respondents were asked to specify the payment interval from a given list that contains their WTP for the project (N=225). In both splits, respondents were asked to complete the NEO-FFI, a 60-item personality inventory designed to assess the five personality domains. Using factor analysis, five factors corresponding to the five personality domains emerged from the dataset indicating that the BFM can describe the personalities of the respondents in this study. However, it was found that that 20 items of the NEO-FFI worked poorly, hence they were excluded from further analysis. Results from probit and tobit regression models revealed a number of systematic relationships between the personality characteristics of CVM respondents and their responses to the WTP question. Openness to experience and conscientiousness exhibited a significantly positive effect on WTP statements for both question formats, whereas extraversion was significantly negatively related to WTP only in the PC format. Surprisingly, neuroticism and agreeableness did not have any effect on WTP responses. When it comes to the influence of the five domains on responses to other contingent valuation questions (socio-demographic household characteristics, lifestyle, general attitudes etc.), neuroticism showed a negative impact on stating extreme responses and a positive effect on protest beliefs. This means that respondents who score high on the neuroticism scale tended to select the middle response options of the Likert scales used in this context regardless of the content of the question. They are also likely to have a strong protest attitude towards the tap water improvement program in question than respondents who score low on the neuroticism scale. Extraversion showed a negative impact on response time, indicating that respondents who score high on extraversion tend to use less time to answer survey questions than low scorers. Conscientiousness displayed a positive influence on stating extreme responses, response time, and protest beliefs. No impact of openness to experience and agreeableness on contingent valuation survey responses was found. Taken together, these results suggest that the personality characteristics of the respondents as measured by the adjusted 40-item NEO-FFI offer new insights into the psychological processes leading to systematic variations in WTP answers and other forms of contingent valuation survey responses. Such new insights give rise to a number of recommendations for further CVM surveys.

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Faculty of Business, Economics and Social Sciences
Institute
Institute of Economics

Examination date

2015-11-03

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Language
English

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330 Economics

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