Sensitivity to scale in contingent valuation: the importance of the budget constraint.
The possible insensitivity of willingness-to-pay (WTP) values to changes in scale continues to cause concern within the contingent valuation (CV) literature. Although several reasons for this phenomenon have been suggested, empirical evidence both supports and refutes insensitivity. This paper presents data that suggest that insensitivity may be significantly determined by the individual's budget constraint: the higher the proportion of income the expressed WTP represents, the greater the insensitivity of that WTP to changes in the scale of the good, irrespective of changes in underlying marginal utility. The methodological implication for CV studies in health care is outlined.
Smith
Richard D
RD
Health Economics Group, School of Medicine, Health Policy and Practice, University of East Anglia, Norwich, UK. richard.smith@uea.ac.uk
D002017:Budgets; D005382:Financing, Personal; D005102:Health Expenditures; D006801:Humans; D007182:Income; D011788:Quality of Life; D012680:Sensitivity and Specificity; D006113:United Kingdom