Prior Information, General Information, and Specific Information in the Contingent Valuation of Environmental Risks: The Case of Nitrates in Groundwater
Poe, Gregory L.; Bishop, Richard C.
Information, or lack thereof, is an important input in value formation and the distribution of contingent values. Although most conceptualizations of the contingent valuation process stress that information provision should be 'adequate,' very little empirical research has been devoted to assessing the effects of different information flows on contingent values and to establishing a standard of information adequacy for contingent valuation studies. The need for such research is particularly cogent for valuing the benefits of reducing environmental risks, a non-market good which is increasingly being valued with the contingent valuation method. Using nitrates in groundwater as a case study, this paper evaluates and compares health risk perceptions and the distribution of contingent values for groundwater protection associated with three different levels of information provision. In the first level, no information about nitrates or personal exposure was provided to the participants, an approach which reflects the philosophy that values should be based on prior information and preferences. The second information level provided participants with general information about the health effects of nitrates, sources of nitrate contamination, government standards for nitrates, indicators of the distribution of nitrate levels in local wells, and opportunities for averting behavior. The third level of information flow provided the general information packet along with specific information about actual nitrate levels found in participants' wells. The primary results of this research are that individuals need afull-information set that includes both general and specific information to identify their own best interests with respect to groundwater protection programs, and that the provision of general information alone appears to lead to biased estimates of willingness to pay for groundwater protection. These results establish a full-information standard for future contingent valuation research of groundwater protection.
Charles H. Dyson School of Applied Economics and Management, Cornell University