Hedonic price method versus contingent valuation method

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Hedonic price method versus contingent valuation method

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UNLV Retrospective Theses & Dissertations
1-1-2008
Comparing values for a private environmental good, xeriscape: Hedonic price method versus contingent valuation method
Carole Ann Rollins University of Nevada, Las Vegas
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Repository Citation Rollins, Carole Ann, "Comparing values for a private environmental good, xeriscape: Hedonic price method versus contingent valuation method" (2008). UNLV Retrospective Theses & Dissertations. 2797. http://dx.doi.org/10.25669/6srk-frc0
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COMPARING VALUES FOR A PRIVATE ENVIRONMENTAL GOOD, XERISCAPE: HEDONIC PRICE METHOD VERSUS CONTINGENT VALUATION METHOD
by
Carole Arm Rollins Bachelor of Science University o f California, Berkeley
1971 Bachelor o f Arts University o f California, Berkeley
I97I Master of Arts University o f California, Berkeley
1974
A dissertation submitted in partial fulfillment o f the requirements for the
Doctor of Philosophy Degree in Environmental Science Department of Environmental Studies Greenspan College of Urban Affairs
Graduate College University of Nevada, Las Vegas
May 2008

UMI Number: 3319137
Copyright 2008 by Rollins, Carole Ann
All rights reserved.
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uNiy

Dissertation Approval
The Graduate College University of Nevada, Las Vegas

A p ril 8

-20 08

The Dissertation prepared by C a r o le Ann R o l l i n s
Entitled Comparing V a lu es fo r a P r iv a te E nvironm ental Good, X e r isc a p e : H edonic P r ic e Method v e r s u s C o n tin g en t V a lu a tio n Method

is approved in partial fulfillment of the requirements for the degree of D octor o f P h ilosop h y in E nvironm ental S cien ce

Exkmination C om m ittee Chair

Exammation Com m ittee M ember ^ m m jn a tio n C om m ittee Member Graduate College Faculty R ^ resen tative
11

Dean of the G raduate College

ABSTRACT Comparing Values for a Private Environmental
Good, Xeriscape: Hedonic price method versus contingent valuation method by Carole Ann Rollins
Dr. Helen Neill, Examination Committee Chair Associate Professor of Environmental Studies
University o f Nevada, Las Vegas
The hedonic price method (HPM) and the contingent valuation method (CVM) are two valuation techniques used to estimate and report benefits o f public and private environmental goods. Both methods are used in comparison studies for public goods, but not for private goods. The purpose o f this study is to extend the knowledge o f economic valuation for a private good by comparing a reported value from a contingent valuation survey with an estimate from the HPM using the application o f xeriscape landscaping in residential settings. Market data were collected from 500 residential locations in Clark County, Nevada; o f this sample, 250 homes had xeriscape landscaping, and the remaining 250 homes did not. Surveys were mailed to these locations, and a copy o f the survey was also made available on the internet. A total o f 49 respondents was obtained. The key findings are that (a) market participants value xeriscape landscaping; (b) survey respondents value xeriscape landscaping; and (c) a benefit estimate for the private environmental good using the HPM is greater than a benefit reported using the CVM,
111

confirming results from past studies o f public goods. This study contributes to the literature by exploring the literature gap in welfare measurement when using two methods and making comparisons and helps to further identify the advantages and limitations of the HPM and CVM valuation techniques.
IV

TABLE OF CONTENTS

ABSTRACT............................................ i............................................................................. iii

LIST OF TABLES................................................................................................................vi

LIST OF FIGURES..............................................................................................................vii

ACKNOWLEDGMENTS .................................................................................................viĆ¼

CHAPTER I INTRODUCTION.......................................................................................I Summary of the Literature Review ................................................................................. 2 Summary of the Research Methods....................................................;............................5

CHAPTER 2 LITERATURE REVIEW...........................................................................7

Definitions..........................................................................................................................7

Theoretical Background.................................................................................................. 10

Applied Environmental Valuation Literature.................................................................30

Applied Environmental Valuation Literature for Landscaping..................................... 35

Summary...............................................................

48

Hypotheses Tests.............................................................................................................50

CHAPTER 3 STUDY SITE, METHODS, AND DATA.............................................53

Description of Study Site................................................................................................ 53

Methods to Test Hypotheses...........................................................................................58

Real Estate Market Data and Neighborhood D ata........................................................ 59

Survey Design and Data.................................................................................................. 77

Comparison of HPM and CVM Xeriscape Values..........................

108

CHAPTER 4 RESULTS............................................... Tests of Hypotheses..........................................

109 ;......................... 109

CHAPTER 5 SUMMARY AND DISCUSSION....................................................... 134

Review and Summary....................................................................................................134

Discussion of Results.....................................................................................................138

Implications and Recommendations...................................................

156

APPENDIX A APPENDIX B APPENDIX C APPENDIX D
APPENDIX E

TABLE OF PRIVATE GOODS COMPARISON STUDIES.............161

SURVEY............................................................................................... 162

HUMAN SUBJECTS PROTOCOL APPROVAL..............................172

HUMAN SUBJECTS SUPPLEMENTARY PROTOCOL

APPROVAL...........................................

174

COMPARISON OF SELECTED KEY CHARACTERISTICS

OF THE POPULATION AND HPM AND CVM SAMPLES...........176 BIBLIOGRAPHY.............................................................................................................. 177 VITA....................................................................................................................................191
VI

LIST OF TABLES

Table 1 Table 2 Table 3
Table 4 Table 5 Table 6 Table 7 Table 8 Table 9
Table 10a Table 10b Table 11 Table 12a Table 12b Table 12c Table 13

Previous Applied Valuation Studies: N onlandscaping......................................31 Previous Applied Valuation Studies: Xeriscape L andscaping........................ 39 Previous Applied Economic Environmental Valuation Studies: Landscaping............................................................................................................. 42 Definitions for HPM and CVM Data and Sources for Clark C ounty............. 56 Descriptive Statistics for Hedonic D ata............................................................... 65 Variable Characteristics and Descriptions for C V M ......................................... 78 Descriptive Statistics for Contingent Valuation D ata........................................ 82 Regression Results for the H PM ......................................................................... 112 Willingness-to-Pay Questions for CVM 1 and CVM 2: One Sample Statistics: Statistics................................................................................................ 120 Kolmogorov Smirnov (K-S) Statistics for CVM Compared W ith H PM 126 Kolmogorov Smirnov Test: CVM Versus HPM Comparison................... 126 Comparison o f HPM with CVM 1 and CVM 2: t Test (param etric).............128 Comparison for Common Variables o f HPM and C V M l + CVM2 Data ... 129 Comparison for Common Variables o f HPM and CV M l Data..................... 131 Comparison for Common Variables o f HPM and CVM2 D ata..................... 132 Hypotheses Test R esults.................................................................................... 138

V ll

LIST OF FIGURES

Figure 1
Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8

View-Residents' Implicit Demand Curves and the Marginal Hedonic Price Curve................................................................ 20 The Utility-Maximizing Resident C M V LA ......................................................... 21 The Implicit Market Value with Lakeview (IM L V A )........................................22 The Residents CMVLP with no Lakeview............................................................23 Xeriscape Residents Implicit and the Marginal Hedonic Price......................... 24 Percent Frequency Versus Dollar Value for Xeriscape for H P M ................... 118 Percent Frequency Versus Dollar Value for Xeriscape for CVM 1 ................123 Percent Frequency Versus Dollar Value for Xeriscape for CVM 2 ................124

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