Environ. Sci. Technol.
2000, 34, 1407-1412
Using Conjoint Analysis To Value
Ecosystem Change†
STEPHEN FARBER* AND BRIAN GRINER
Graduate School of Public and International Affairs,
University of Pittsburgh, Pittsburgh, Pennsylvania 15260
Economists have developed a variety of methods to
measure the values of environmental goods and services.
Conjoint analysis (CJ) is a technique developed by
mathematical psychologists to establish the structure of
preferences across multi-attribute alternatives. It is a type
of stated-preference method that has captured the
attention of economists for purposes of analyzing preferences
toward environmental goods and services. This paper
outlines the applicability of CJ to environmental valuation,
illustrates applications and valuation issues in the
literature, and presents an application of CJ to valuing a
Pennsylvania watershed quality improvement.
I. Introduction
Economists have developed a full tool kit for the economic
valuation of natural resources, the environment, and its
services (1, 2). Valuation methods are divided into revealed-
preference (RP) techniques, where valuations are inferred
from actual observations of choice behavior, and stated-
preference (SP) techniques, where valuations are directly
obtained from hypothetical statements of choice. The RP
methods include the following:
Hedonic pricing method, whereby premiums individuals
will pay to have environmental amenities (e.g., air quality or
beach access) are observed
Travel cost methods, whereby costs individuals will incur
to experience spatially distributed natural systems (e.g., forest
recreation) are observed
Averting cost methods, where costs that people will incur
to avoid environmental damages (e.g., unhealthful air) are
observed
The SP techniques include the following:
Contingent valuation method (CVM), by which people
are presented with a hypothetical contingency scenario and
are asked explicitly what that scenario, such as improved air
quality, is worth to them
Conjoint analysis (CJ) method, by which people are
presented with a set of hypothetical scenarios involving
various levels of two or more attributes and are asked to
choose, rate, or rank among them; and the structure of their
preferences toward these attributes are inferred from their
choices
Economists typically distinguish between values to society
based on use of a resource and values not based on use. Use
values may include consumptive uses, such as resource
extraction, or nonconsumptive uses, such as hiking and
viewing. Nonuse values would include knowing that a
resource is in a certain condition when there is no intention
of ever using it; this has been referred to as existence or
†Part of special issue on Economic Valuation.
* Corresponding author phone: (412)648-7602; fax: (412)648-2605;
e-mail: eofarb@birch.gspia.pitt.edu.
10.1021/es990727r CCC: $19.00  2000 American Chemical Society
Published on Web 03/03/2000
intrinsic value. Values based on preservation for potential
future use or to avoid irreversible losses are referred to as
option values. Total value is the sum of user, option, and
nonuse values (3). Both RP and SP techniques can be used
to assess use values; but SP techniques may be more
appropriate for nonuse values.
Resource and environmental valuation is important in a
variety of contexts, including damage compensation and
rational management. The above techniques have all been
developed to deal with the pervasive inability to observe
market prices for all of nature’s goods and services (4). Where
market prices are unobservable or cannot reflect the full value
of goods and services, economists seek to determine what
they call “shadow prices”, which represent the difference
that a unit of the good or service makes to social welfare (1).
CVM has an extensive literature (5) and will not be
summarized here. This paper presents an overview of the
history and applicability of CJ to environmental valuation.
Section II briefly explains CJ and how it can be used in a
manner consistent with utility theory to measure values of
environmental changes. Section III illustrates the variety of
applications to environmental valuation and discusses some
of the leading issues in this application of CJ. Section IV
presents results of a recent CJ valuation analysis of watershed
quality improvements in western Pennsylvania.
II. What is CJ and How Can It Be Used To Estimate
Environmental Valuations?
CJ was developed by mathematical psychologists (6) in the
early 1960s to transform subjective choice responses into
estimated parameters. It has been defined as (7):
“any decompositional method that estimates the structure
of a consumer’s preferences (i.e., estimates preference
parameters such as part-worths, importance weights, ideal
points), given his or her overall evaluations of a set of
alternatives that are prespecified in terms of levels of different
attributes.”
CJs were adopted by marketing research scholars in the
early 1970s to analyze consumer choice (8). Since that time,
CJ has been used in a large number of consumer applications
(9), transportation (10, 11), and health care (12, 13).
The application of CJ can be illustrated with a simple
example. Suppose a decision-maker is faced with considering
goods possessing various levels of several attributes, (X1-
X3), where the goods may be autos and X1 may be
horsepower, X2 may be color, and X3 may be price. Suppose
the decision-maker has a value or utility function represented
by
U(X) ) f(X1, X2, X3) (1)
For simplicity, suppose this utility function takes the following
linear form:
U(X) ) w1‚X1 + w2‚X2 + w3‚X3 (2)
where w1 represents the weight attached to attribute X1, etc.
These weights are termed “part-worths” and reflect the
relative importance of each attribute in the decision-maker’s
choice (13). CJ provides a variety of procedures for deter-
mining the part-worth weighting factors, i.e., the structure
of preferences.
Using the auto example, suppose horsepower has two
levels, 120 and 150 hp; color has three levels, blue, green, or
red; and price has four possible levels, $10 000, $15 000,
$20 000, or $30 000. There can then be 2 × 3 × 4 ) 24 different
VOL. 34, NO. 8, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY 9 1407
cars to choose from. Suppose we list all possible autos as
follows:
alternative horsepower (X1) color (X2) price (X3)
1 120 blue $10 000
2 150 blue $10 000
3 120 green $10 000
. . . .
. . . .
24 150 red $30 000
Next, we ask the individual to make judgments of choices
among the alternatives. We could ask the person to rate or
rank these alternatives from most to least preferred, called
“full-profile” evaluation. Or we could ask the individual to
compare all alternatives against one another (276 compari-
sons), called “discrete choice” evaluation (14), perhaps asking
him/her to note the strength of preference. This information
can then be used to establish the utility function using a
variety of statistical procedures (7).
Suppose the estimated utility function is
U(X) ) 500X1 + 1000X2 - 10X3 (3)
This function not only establishes the relative weights
attached to each attribute but also establishes the tradeoffs
between attributes. For example, when horsepower (X1)
increases by 1 unit, utility remains the same if the price (X3)
of the car increases by $50. This implies that the value of a
unit of horsepower to the individual is $50; i.e., this is the
maximum amount of money the person would give up to
obtain a 1 unit increase in horsepower. This $50 is what
economists refer to as the shadow value, willingness to pay
(WTP), or marginal benefits of the attribute horsepower.
This oversimplified example is used to explain the essence
of CJ. There are considerable complexities in selecting
experimental designs for choice situations. These include
defining the attributes and the levels in ways that ensure a
comprehensible number of alternatives and attributes (7)
and choosing between judgment (ranking or rating) versus
discrete choice analyses. In any case, CJ uses individual or
group choice among multi-attribute alternatives to provide
evidence of relative valuations of attributes. This is the
usefulness of the procedure to economists in valuing
environmental goods and services. The environment and
ecosystems provide complex multi-attribute values to people;
e.g., forests provide timber, habitat, soil protection, hydrologic
management, climate moderation, etc. Each attribute has a
unique shadow value. In addition, hypothetical multi-
attribute scenarios of CJ enable the determination of prefer-
ence structures for scenarios that subjects may not be familiar
with or for nonuse values. They permit the determination of
part-worths of attributes that are impossible to identify in
real world situations, perhaps because those attributes may
be highly correlated, such as clean air and panoramic views
or because we cannot infer value from use in the case of
nonuse values. CJ allows more generic determinations of
preference structures independent of specific contexts.
The distinctions between CVM and CJ are subtle but
important. The primary purpose of CVM is to “elicit people’s
preferences for public goods by finding out what they would
be willing to pay for specified improvements in them.” (5).
It is called “contingent” because the WTP is contingent upon
the hypothetical good or scenario described to the subject.
The method presents the subject with a characterization of
the good being valued and asks directly, “What would you
pay?” or “Would you pay $X?” for the good. In the automobile
example, CVM would ask “What would you pay for a 150 hp,
green car?” The good or scenario itself is directly valued,
either by asking what a person would pay for it or the good
1408 9 ENVIRONMENTAL SCIENCE & TECHNOLOGY / VOL. 34, NO. 8, 2000
or scenario has some price attached to it, and the subject is
asked the binary choice question whether they would accept
the scenario at that price. CVM is frequently referred to as
a “referendum” method, since the option to the subject is
select or reject the scenario, as in voting. The voting analogy,
in fact, is often claimed as an advantage of CVM for valuing
public goods, whose delivery is likely subject to some direct
or indirect voting process.
The primary purpose of CJ is to determine the structure
of preferences that underlie the judgments of goods or
scenarios. This can be accomplished by either presenting
the individual with a set of alternative goods or by presenting
attributes of goods. In the auto example, preferences are
comprised of the attributes money, horsepower, and color.
CJ would seek to establish the relative importance of these
independent attributes. It would do so by designing prefer-
ence-type experiments, such as rating or ranking scenarios
with varying levels of the attributes, whereby subjects state
their preferences across all alternatives or by using choice-
type experiments in which subjects are asked to choose a
most preferred scenario among two or more alternatives
when levels of attributes differ across scenarios (10).
The economist’s interest in CVM and CJ stems from the
ability to use these techniques to determine the value that
individuals or groups place on nonmarketed goods and
services, such and environmental and resource services.
Suppose that under scenario 1 the individual or group can
obtain marketed goods at a price of P with an income of Y,
and it has a fixed quantity (quality) of public good, Q1; under
scenario 2, the individual or group faces the same market
prices and income but has Q2 of the public good. Let the
individual or group utility function U be
U ) U(P, Q, Y) (4)
The economic valuation of scenario 2 relative to scenario 1
is an amount of money, compensating surplus (CS), such
that
U(P, Q2, Y - CS) ) U(P, Q1, Y) (5)
CS is the maximum amount of money that would be given
up to make the utilities of the two scenarios equal. Of course,
scenario 2 may be worse than scenario 1 and CS would be
negative, requiring compensation.
Economists are concerned that attempts to determine
CS employ techniques and estimating methodologies that
are consistent with developed utility theory, i.e, are utility
theoretic (10). Choice-type experiments using CVM or CJ
techniques meet this requirement and are consistent with
recently developed random utility models (RUM) of choice.
Under RUM, choice is a probabalistic behavior relying on
both systematic and random elements. The utility function
takes the form
U ) V(P, Q, Y) +  (6)
where V(.) is the systematic element and  is a random
element in choice. The probability that an individual or
group will chose scenario 2 over scenario 1 is then given by
Pr{V(P, Q2, Y) + 2 > V(P, Q1, Y) + 1} or
Pr{V2 - V1 > 1 - 2} (7)
where Vi refers to systematic utility under scenario i. If the
error terms are distributed in a particular way (identically
and independently distributed with a type I extreme value
distribution), the probability of choosing scenario 2 over
scenario 1 is given by the conditional logit probability
function:
 Pr{2 chosen over 1} ) exp(V2)/Σ expVj (8)
where Vj is the nonrandom element of utility for scenario j
() 1, 2 in this simple case) (1). After specifying the functional
form of V, maximum likelihood econometric techniques can
be used to estimate the parameters in V. Once V is known,
CS can be determined. For example, when V ) β1 + β2P +
β3Q + RY, CS for a representative individual in a sample can
be determined from eq 5:
CS ) -β3(Q2 - Q1)/R (9)
The aggregation of CS measures across choice options has
been worked out by Hanemann (15). Establishing a choice
experiment, using either CVM or CJ, in conjunction with
estimation of a utility-theoretic utility function permits the
measurement of the monetary valuation of environmental
quality changes.
III. How Have Economists Applied CJ to Environmental
Valuation?
The ability to quantify individual or group preferences toward
attributes of the environment or ecosystems provides a useful
avenue for the determination of monetary compensation or
in-kind compensation for damages as well as useful measures
of benefits and costs of environmental enhancements or
degradation. CJ is particularly useful in this regard as it
permits the design of experiments resulting in measurements
of acceptable tradeoffs between ecosystem services and
between services and money. CJ has received approval by
NOAA as an acceptable method for the determination of
in-kind compensation for resource damages (16).
One of the first uses of CJ in quantifying environmental
preferences was a study of water quality (17). This study
used a ranking of water quality and antipollution tax
alternatives to estimate a utility function. The majority of
respondents preferred the swimmable water quality ac-
companied by an annual $240 tax alternative. Researchers
have used the ranking procedure to value visibility improve-
ments in national parks (18). Lareau and Rae (19) used CJ
to estimate the WTP for diesel odor reductions in Philadel-
phia. They presented respondents with a set of alternatives,
varying in the number of weekly odor contacts for two
different odors (inhaled by respondents prior to the choice
experiment) and in the annual costs associated with odor
reductions. Respondents were asked to rank 12 alternatives.
Smith and Desvousges (20) used CJ to estimate the
valuation of water quality improvements for a river in
Pennsylvania. They used a water quality “ladder” developed
by Resources for the Future, where water quality is defined
on the basis of safe activities, including boating, fishing,
swimming, and drinking. They presented respondents with
four alternatives, each representing a different water quality
and accompanying annual payment. Respondents were asked
to rank the alternatives. Estimates ranged from roughly $40
to $80 per year per household for improving water quality
from boatable to fishable.
Opaluch et al. (21) used a discrete choice CJ to determine
the preference structure for siting a municipal landfill. Focus
group sessions suggested the decision process be broken
into two parts: one for the general location and another for
the specific site position. There were six location attributes:
number of homes, presence of park land, presence of farm
land, presence of an elementary school, use of local roads,
and annual cost to each household. There were seven site
attributes: acres of marsh, acres of woods, acres of farmland,
wildlife habitat, pond acreage, groundwater quality, and
annual household payment. Respondents were presented
with abstract pictures of the alternative scenarios and were
asked to select the most preferred in a paired choice. Specific
sites could be scored using the estimated utility function
weightings of attributes. Estimates of individual utilities could
be used to determine the percentage of the voters who would
favor a given site location. Although they do not suggest it,
the estimated utility function could also be used to determine
compensation necessary to offset site location decisions.
CJ responses to choices can be expressed as ratings (e.g.,
scale 0-10), rankings (e.g., most preferred to least preferred),
and simple binary choices (e.g., prefer scenario 1 to scenario
2) with or without intensity of preferences. Johnson and
Desvousges (22) used a binary choice CJ, with intensity of
preferences, to estimate the structure of preferences for
various energy programs. Using nine attributes, such as fish
consumption bans, respiratory cases, electric bill, sugar maple
damage, etc., they presented respondents with two scenarios
and asked them to rate their choice; e.g., strongly prefer
scenario 1 to scenario 2, moderately prefer scenario 1 to
scenario 2, etc. The economic value of policy alternatives
could be evaluated since electric bills differed across
alternatives. For example, if an energy policy requires a fish
consumption ban on a lake, people would be willing to incur
a 1.2% increase in their electricity bill per month to avoid the
ban.
Economists are beginning to test the applicability of
different types of CJ specifications to valuation problems.
One concern is whether ratings, rankings, or binary choice
provides the most useful valuation information. Mackenzie
(23) used each of the three CJ choice methods to determine
the structure of preferences for waterfowl hunting. He found
that the ratings model yielded the most efficient estimates
of valuations, meaning lower variances in estimates. Roe et
al. (24) also tested for differences in using CJ rankings versus
ratings in valuing salmon management options. Their
experimental design required individuals to rate four man-
agement scenarios on a scale of 1-10. These ratings were
transformed into ratings differences from the status quo, full
rankings (highest ratings ranked first, etc.) and binary
rankings (ratings higher than status quo versus ratings lower
than or equal to status quo). They used tobit procedures to
estimate ratings and ratings differences functions, ordered
logit to estimate full rankings functions, and binary logit
procedures to estimate binary rankings functions. Ratings
differences and binary rankings yielded significant and
utility-theoretic correct coefficient estimates on the prices
of alternatives, while ratings and full rankings did not. The
derived measures of CS differed considerably across mea-
surement scales. The conclusion is that measurement scales
make a difference in determining the form of utility functions
and valuation measures. However, the experimental design
was to derive other measurement scales from the initial
ratings data rather than to test whether there would be
differences if the initial measurement scales were ratings,
rankings, or binary rankings.
While there remains controversy over whether SP tech-
niques provide useful valuation information due to their
hypothetical context (25), concerns have been expressed that
CJ may suffer from the same problem relative to CVM. For
example, Roe et al. (24) note that while CVM asks people
whether they would “buy” a good or scenario, CJ only
determines the structure of underlying preferences and not
whether the person would behave on the basis of those
preferences. They suggest combining CJ with contingent
behavior questions.
Adamowicz et al. (26) used a procedure to combine
information from CJ experiments and RP for recreation site
choice. They applied the procedure to derive preference
structures for recreational activities in western Canada. The
CJ choice experiment asked respondents to choose one of
three scenarios: using one of two recreational sites or staying
VOL. 34, NO. 8, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY 9 1409
home. Their estimation model allowed determination of the
additional distance a user will travel to a site if recreational
opportunities at the site are enhanced. Using the monetary
cost of travel, they valued recreational improvements from
these additional distance measures. This is interesting, since
the payment for the scenario is not directly monetary but
can be inferred from distances persons would be willing to
travel for improved site conditions. Combining CJ and RP
information to jointly estimate preference structures and
welfare measures shows promise, combining the advantages
of each and offsetting their individual weaknesses
As researchers have claimed that choices are based on
people’s perceptions rather than purely objective measures,
Adamowicz et al. (27) further explored whether objective or
perceptual measures of attributes make a difference in
estimates of preference structures and welfare measures. By
focusing on increasing moose populations, they found that
welfare measures differed substantially. They suggested that
perceptions of moose populations were higher than was
objectively the case. This resulted in lower perceived marginal
utility of moose population increases than objective marginal
utility measures, leading to much lower welfare estimates
using perception as compared to objective data.
Like CVM, CJ can be used to assess values of environmental
enhancements or degradation for both use and nonuse
(passive) values of the environment. Nonuse value is not
reflected in revealed behaviors, such as purchases, trips, etc.
Adamowicz et al. (28) used CJ to estimate nonuse preferences
for the threatened woodland caribou population in Alberta,
Canada. The choice experiment included seven attributes,
including wilderness area, recreation restrictions, moose
populations, etc. Income taxes were the payment vehicle for
financing the caribou management scenarios. Using a RUM,
they estimated both CVM and CJ choice models. Interestingly,
a comparison of the two models showed similar parameter
estimates for the choice attributes common to the two models
(income) but very different welfare measures.
Boxall et al. (29) also found that CJ and CVM welfare
measures differed substantially, by an order of magnitude,
in their recreation application. The CJ valuations were similar
to RP (travel cost) estimates obtained in a related study. This
suggests that CJ and CVM may yield very different welfare
estimates. This may be because CJ sets up scenarios in which
individuals explicitly see alternatives, while a CVM scenario
does not present a variety of alternatives. Substitution may
be an important factor in some resource valuations, making
CJ a more realistic method in those contexts.
IV. A Conjoint Application to Watershed Quality in
Western Pennsylvania
Stream quality is a severe problem in western Pennsylvania,
with over 580 of 1100 assessed stream miles not meeting
state water quality standards, and 430 of those nonattainment
miles due to acid mine drainage. This study used CJ to value
stream quality improvements to users and nonusers for two
streams in western Pennsylvania. The subbasins in which
the two streams of interest are located, Loyalhanna Creek
and Conemaugh River, had 60% and 30% of their stream
miles degraded, respectively. A mail survey was administered
during 1996 to a random sample of residents living within
90 mi of the evaluated streams. Individuals were presented
with several choice scenarios and were asked to choose
between the status quo and various combinations of stream
quality improvements for the two streams. Each alternative
had a price attached. The marginal value of each type of
stream quality improvement was estimated using binary
choice (BC) and intensity of preference (IP) responses in a
RUM framework.
Habitat evaluation by the U.S. EPA and Pennsylvania State
fisheries biologists distinguishes between stream reaches that
1410 9 ENVIRONMENTAL SCIENCE & TECHNOLOGY / VOL. 34, NO. 8, 2000
FIGURE 1. Typical choice question.
are severely polluted, moderately polluted, and unpolluted.
A severely polluted stream has been determined by biologists
to be incapable of supporting fish and other organisms.
Fishing conditions would be poor to nonexistent. Wildlife
could not rely on these streams for food and habitat. However,
human health is not typically affected. Moderately polluted
streams will support only some fish and other organisms.
Reproductive conditions for fish are poor, and fishing is
supported but catch would be limited. Unpolluted streams
are those where fish and other organisms can thrive. By these
designations, Loyalhanna Creek is currently moderately
polluted, and the Conemaugh River is severely polluted.
The survey was accompanied by a brief letter presenting
commonly asked questions and answers about water quality
in the study region. A map of the streams in the watershed,
shaded according to the degree of degradation, followed the
introductory letter. A major difficulty was defining the “good”
for the choice alternatives. After discussions with fish and
wildlife managers, we decided to use a mixed habitat-
fisheries characterization. The resulting characterization of
severely polluted, moderately polluted and unpolluted, based
on survivability of fish and other organisms, was described
to survey recipients. The areas of stream valuation were
illustrated on the map provided. Instructions to recipients
noted that stream cleanup would be costly, resulting in higher
prices or taxes. A typical choice question is illustrated in
Figure 1.
As Figure 1 illustrates, the choice involved three at-
tributes: stream A quality, stream B quality, and a price.
Stream A had two levels: moderately polluted and unpolluted.
Stream B had three levels: severely polluted, moderately
polluted, and unpolluted. In addition, five price levels were
selected. There were five possible improvement combina-
tions, and each respondent was given all five as choice options
to the status quo. Prices were varied across respondents.
Sampling of respondents came from zip codes in grids
constructed around the stream sites with higher sampling
rates for grids closest to the sites. A sample of 3958 households
was drawn, and first class postage surveys were mailed to
them. Because of a limited budget, only one mailing was
sent. We did not follow the Dilman (30) mailing procedure
of repeat contacts. A total of 510 households responded, while
372 surveys were returned as undeliverable. This was only
a 14% response rate, excluding undeliverables, which is low.
However, this rate is not far below that of other general
population CJ samples (3, 2) when considering the fact there
were no attempts to predetermine who was willing to
respond. Only 367 of the 510 returned surveys were usable
as some respondents did not answer all valuation related
questions, particularly income.
Suppose the individual has an interactive RUM utility
function of the form
U ) β1 + β2P + β3Q + β4QY + R(Y - w) +  (10)
where P is the price of goods and services, Q is the
environmental quality condition of the streams, I is income,
and w is the fixed payment (price) for a choice alternative.
It is expected that β3 and R are positive and that β4 is positive TABLE 1. Estimation Results for Binary Choice (BC) and
if increased incomes enhance the utility of stream quality Intensity of Preferences (IP) Logit Random Utility Modelsa
improvements. In the choice experiment, P and Y are constant coeff for variable BC (1) IP (2)
across alternatives, so when comparing the utility of two
alternative scenarios constant -0.3959 1.1864
(0.03) (0.00)
∆q1, A: MfUb 0.0953 0.2463
y ) ∆U ) β1∆Q + β2 ∆QY - R(∆w) + (2 - 1) (11) (0.60) (0.08)
∆q2, B: SfMb 0.0311 0.2080
where ∆Q ) Q2 - Q1, etc. Under binary choice (BC), if we (0.89) (0.22)
let ∆q3, B: SfUb 0.2436 0.3011
(0.26) (0.07)
y ) 1 if ∆U > 0; select scenario 2 over 1 ∆w -0.0077 -0.0056
(0.00) (0.00)
) 0 if ∆U e 0 ∆q1I 0.0437 0.0101
(0.17) (0.67)
and i is distributed in a certain manner (Weibull), McFadden ∆q2I 0.0854 0.0418
(31) has shown that a logit model can be used to estimate (0.02) (0.12)
the coefficients in eq 11. ∆q3I 0.1043 0.0803
(0.00) (0.00)
The binary choice RUM outlined above can be extended
µ2 nac 0.9020
to incorporate the IP for a choice using ordinal response (0.00)
categories. An IP model has been used by Bergstrom et al. µ3 na 1.7465
(32) to estimate demand functions for local school expen- (0.00)
ditures, by Magat et al. (33) to value morbidity risk reductions µ4 na 2.8520
associated with chemical products, by Kamakura and Bala- (0.00)
sundaram (34) to estimate the demand for electric utility log (L) -1001.1 -2709.9
products and services, and by Colias and Salazar-Velasquez a Probability values in parentheses, N ) 367. b The symbolism A:
(35) to estimate purchase intent for new products. [Like the MfU represents the hypothetical qualitative change in stream A
binary choice RUM, ∆U defined in eq 11 is not directly (Loyalhanna) from moderately polluted to unpolluted; S for stream B
represents severely polluted. c na, not applicable.
observable. However, we can assign the following values to
y:

yij ) 0 if ∆U < 0; TABLE 2. Estimated Marginal Valuations of Compensating

the person chooses scenario 1 over scenario 2 Surplus (CS) for Stream Improvements Using Binary Choice
(BC) and Intensity of Preferences (IP) RUMsa
) 1 if 0 e ∆U < µ1; all samples (N ) 367) nonusers (N ) 70)
the person moderately prefers scenario 2 to scenario 1
stream improvement BC (1) IP (2) BC (3) IP (4)
) 2 if µ1 e ∆U < µ2; A: MfU $35.76 $51.35 $3.05 $12.55
the person strongly prefers scenario 2 to scenario 1 (15.89) (17.20) (35.65) (48.02)
B: SfM $49.62 $67.64 $1.39 $47.61
) P if µP e ∆U; (15.55) (22.82) (64.33) (64.33)
B: SfU $87.43 $112.44 $38.87 $54.22
the person very strongly prefers scenario 2 to scenario 1
(21.78) (23.13) (49.59) (63.42)
where there are P+1 ordinal response categories and µp a Values represent household WTP for Each of 5 years; standard

represents the unobserved threshold for response category
p. The single 0 threshold of the BC model is replaced by P
thresholds in the IP model. A presumed advantage of
permitting choice response intensities is that it may more
accurately mimic mental heuristics in hypothetical choice
situations as opposed to real choice situations where a 0,1
choice is actually made. This may lead to less rejection of the
hypothetical choice experiment, i.e., protest responses.]
The estimation results for eq 11 using both BC and IP are
shown for the complete sample in Table 1, columns 1 and
2. Quality changes, ∆qi, are discrete with ∆q1 representing
the improvement of stream A from moderately polluted to
unpolluted, etc. All coefficients have the expected sign. The
IP model appears to improve the significance of the quality
change variables, suggesting that allowing individuals to
respond to choices with degrees of preference might yield
more meaningful evaluations of willingness to accept quality
improvements than forcing them into a binary “accept/reject”
choice.
We can use eq 9 to determine the compensating surplus
(CS) or WTP for the three types of stream quality improve-
ments used in the study. Table 2 shows estimated CSs, using
mean household incomes in the sample, for each quality
change. These results suggest that households would be
willing to pay between $35 and $51 per year for a 5-year
period in order to have stream A quality improved from
errors of estimates in parentheses. Evaluated at sample mean household
income.
moderately polluted to unpolluted, depending upon which
estimation model is used. The IP model shows higher
valuations than the BC model for all quality changes; offering
respondents the ability to express degrees of preference
appears to reduce their rejection of more costly choice
alternatives. The WTP for cleanup of the more severely
degraded stream B is greater than for stream A, which we
would expect. Table 2 shows that WTP ranges from roughly
$50 to $68 annually for 5 years to improve stream B from the
current severely polluted status to moderately polluted and
from $87 to $112 annually for 5 years for an improvement
to an unpolluted condition.
Equation 11 was also estimated for persons who desig-
nated that they had not used either stream during the past
year. The resulting CS estimates are shown in columns 3 and
4 of Table 2. Estimates of WTP for nonusers are clearly less
than for the sample as a whole, as might be expected. For
example, the typical nonuser household CS for improving
stream A ranges from only $3 to $13 per year for 5 years.
However, like users, nonusers are willing to pay more for
greater stream quality improvement, as the CSs for stream
B show. The standard errors of the estimated CSs are also
larger than for the sample as a whole, suggesting less

VOL. 34, NO. 8, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY 9 1411

confidence in the CS estimates for nonusers than for the (7)
sample as a whole. (8)
The purpose of this CJ study was to obtain estimates of (9)
(10)
quality improvements for only two streams. Water quality (11)
degradation was not the policy issue, so valuing WTP to avoid
or willingness to accept compensation for degradation was (12)
not an appropriate valuation concept, although CJ could be
used for valuing degradation. The intention of the study was (13)
(14)
not to establish the underlying preference structure of
(15)
respondents toward the quality of streams, in general. If it
were, a different design for alternatives would have to be
used. For example, preferences toward streams may have (16)
included use dimensions, such as fishability and swimma- (17)
bility; aesthetic dimensions, such as clarity and color; and (18)
health dimensions, such as bacterial condition. Application
of CJ to determine general preference structures would then
require determination of appropriate dimensions of utility
and salient measures to be used in representations of the (19)
alternatives. Focus group sessions could determine these (20)
dimensions and measurement.
(21)
IV. Conclusion (22)
CJ is one of many tools economists can use to value resources
and environmental conditions. While suffering from the same (23)
(24)
concerns as CVM regarding the hypothetical nature of the
valuation, it offers some advantages. For example, it offers (25)
the opportunity to explicitly determine tradeoffs in envi-
ronmental conditions through its emphasis on discovering
preference structures and not just monetary valuation. This (26)
may be especially important when valuing ecosystems, which
(27)
provide a multitude of joint goods and services; it more
reasonably reflects multi-attribute choice contexts than the (28)
typical unidimensional CVM. It may also be important when
the objective is to determine preference structures in a general (29)
manner independent of particular contexts. It offers ranking
and rating measurement scales rather than just binary choice. (30)
On the other hand, it may be more complicated to administer (31)
and more difficult for respondents to understand.
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