A widely used alternative to the open-ended format is the 

 iterative bidding game where interviewers ask respondents for a 

 yes or no response to a specified bid amount. If the respondent 

 is willing to pay that amount the bid is raised in increments 

 until the persons maximum willingness to pay is reached. 

 Iterative bidding is a costly question format which requires face 

 to face or telephone contact between interviewers and 

 respondents . 



A third question format, the dichotomous choice approach, 

 combines some of the better features of both open-ended and 

 iterative bidding. In dichotomous choice, the individual is 

 faced with a single specific dollar bid and (like bidding games) 

 the response is a simple market-like yes or no. The dollar bid 

 amount is systematically varied across respondents. This format 

 is amenable to mail surveys and is therefore relatively low cost. 

 This relatively new approach has been successfully applied to 

 valuation of hunting permits (Bishop and Heberlein, 1980) , 

 boating and scenic beauty (Boyle and Bishop, 1984) , and beach 

 recreation (Bishop and Boyle, 1985) . 



In this study the dichotomous choice approach was used to value 

 deer hunting trips. Although there are advantages and 

 disadvantages to each method recent research shows dichotomous 

 choice models can provide fair approximations to actual market 

 transactions (Bishop and Heberlein, 1980; Welsh, 1986) . In 

 general, comparisons of real markets to simulated CVM markets 

 indicate that respondents attempt to give their true value of 

 resources being studied. A discussion of the specific CVM 

 questions asked and the application of CVM analysis to Montana 

 deer hunting is presented in chapter 5. 



Estimation of Willingness to Pay Using Dichotomous Choice CVM 



The major disadvantage of the dichotomous choice method is that 

 analysis is more complex than with open-ended or iterative 

 bidding methods. In view of the considerable advancements in 

 methods for modeling discrete choice (Amemiya, 1981) this 

 complexity is manageable and acceptable when compared with the 

 advantages which dichotomous choice CVM questions afford. These 

 advantages include: a realistic market-like scenario and a high 

 percentage of responses to the CVM questions. 



Dichotomous choice methodology estimates expected maximum 

 willingness to pay in two steps. In the first step, a logistic 

 regression is run between the probability of a yes would pay $X 

 response as the dependent variable and the amount $X as the 

 independent or explanatory variable. Once this logit curve is 

 estimated the area under that curve is the expected maximum 

 willingness to pay. 



