Module 4302
Consumer Economics 2: Theory and Application for Valuing Non-Market Goods

Instructor

Prof. Xiaohua YU Ph.D., University of Göttingen
Email: xyu@gwdg.de; Tel: 0551-3919574, Office: 10.121

Lecture Room: Due to the coronavirus crisis, this course will be offered online by ZOOM if the classes do not return to normal.

Lecture Time: 9:00 am, 8.Aug. 2022 – 12:30 am, 12. Aug. 2022

Prerequisite courses: Introductory econometrics and Stata Software

Course Description

The techniques of valuating non-market goods are widely used for agribusiness and environmental economics. This course is designed for graduate-level students at the University of Goettingen and some other related universities, and helps understand the fundamental economic theory of non-market goods and master basic econometric techniques for applications.
This course includes three parts:
Part I introduces the basic theory;
Part II introduces the econometric techniques; and
Part III is practice with the real data.

Course Outline

1. Introduction

   Part I: Basic Theory

2. Measurements of Welfare Changes
   • Individual Preferences and Demand
   • Welfare Measures for Changes in Prices
   • Welfare Measures for Changes in Factor Prices
   • Welfare Measures for Quantity Changes
   • Aggregation and Social Welfare
3. Revealed Preference Models of Valuation
   • Environmental Quality as a Factor Input
   • Individual Demand for Environmental Quality
   • The Structure of Preference: Complements or Substitutes
   • Discrete Choice Models and Measures of Values
4. Stated Preference Models of Valuation
   • Welfare Economics of Stated Preference Questions
   • Validity of Stated Preference Welfare Measure
   • Psychological Fundament of Stated Preferences
5. Values under uncertainty
   • Individual Preferences and Expected Utility
   • Aggregation and the Welfare Criterion
   • Revealed Preference Methods under Uncertainty

   Part II: Methods and Econometric Techniques

6. Econometrics of Limited Dependent Variables
   • MLE
   • Maximum Simulated Likelihood
   • Probit and Logit
   • Tobit, Cragg Model, and Heckman Model
7. Contingent Valuation Methods (CVM)
   • Continuous Methods: Open-Ended and Payment Cards
   • Discrete methods: Single-Bounded and Double Bounded
8. Choice Experiments (CE)
   • Experiment Design
   • Econometric Estimation
9. Experimental Auction
   • Auction Design
   • WTP Estimation
10. Hedonic Techniques
    • Basic Theory
    • Model Specification and Estimation
    • Measurement of Welfare Changes

    Part III: Practice

11. Lab Sessions

Teaching Method: Lectures + Lab Sessions

Language: English

Credits: 3

Grades: Participation and Exam

Readings and References

Textbook:
Freedman A. M. 2003 The Measurement of Environment and Resource Values: Theory and Methods (2nd Edition), Resource for the Future, 2003.

• Antle J. M. 2001. “Economic Analysis of Food Safety”. B. L. Gardner & G. C. Rausser (ed.) Handbook of Agricultural Economics, Vol.1B (Chapter 19): 1083-1136.
• Dannenberg A. 2009 “The Dispersion and Development of Consumer Preferences for Genetically Modified Food — A meta-analysis”, Ecological Economics, Vol.68: 2182-2192.
• Deaton A. and J. Muellbauer. 1980. Economics and Consumer Behavior. Cambridge: Cambridge University Press.
• Carson R.T. and W. M. Hanemann.2005. “Contingent Valuation”. Handbook of Environmental Economics, Chapter 17, Vol.2: 821-936.
• Fischhoff A. 2005. “Cognitive Processes in Stated Preference Methods”. Handbook of Environmental Economics, Chapter 18, Vol.2.
• Giampietri E., D. Koemle, X. Yu and A. Finco (2016) Consumers’ Sense of Farmers’ Markets: Tasting Sustainability or Just Purchasing Food? Sustainability 2016, 8(11), 1157. https://doi.org/10.3390/su8111157.
• Gao Z., T. C. Schroeder and X. Yu, 2010 “Consumer Willingness to Pay for Cue Attributes: the Value beyond Its Owen”, Journal of International Food and Agribusiness Marketing, Vol. 22(1): 108-124.
• Gao Z., L. House and X. Yu (2010): “Using Choice Experiment to Estimate Consumer Valuation: the Role of Experiment Design and Attribute Information Loads”. Agricultural Economics, Vol. 41 (6): 555-565. http://ageconsearch.umn.edu/handle/49406
• Hanemann M. 1984. “Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses” American Journal of Agricultural Economics, Vol. 66(3): 332-341. https://onlinelibrary.wiley.com/doi/abs/10.2307/1240800
• Hanemann M., J. Loomis, and B. Kanninen, 1991. “Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation.” American Journal of Agricultural Economics, Vol. 73(4):1255-1263. https://doi.org/10.2307/1242453
• Liu Y., Y. Zeng and X. Yu, 2009: Consumer Willingness to Pay for Food Safety in Beijing: A Case Study of Food Additives. Paper at the 27th Conference of International Association of Agricultural Economists (IAAE), 16-22 Aug., Beijing
• Lusk J. L. and T. C. Schroeder 2004. “Are Choice Experiments Incentive Compatible? A Test with Quality Differentiated Beef Steaks.” American Journal of Agricultural Economics, Vol. 86(2): 467-82. https://doi.org/10.1111/j.0092-5853.2004.00592.x
• Maddala G.S. (1983) Limited Dependent and Qualitative Variables in Econometrics, Cambridge University Press.
• Nelson J.P., Kennedy P.E., 2008, “The Use (and Abuse) of Meta-Analysis in Environmental and Natural Resource Economics: An Assessment”, https://ssrn.com/abstract=1117490, 08/2008.
• Quan S., Y. Zeng, X. Yu and T. Bao (2018) WTP for Baby Milk Formula in China: Using Attribute Non-Attendance as a priori Information to Select Attributes in Choice Experiment. Agribusiness: An International Journal. Volume34, Issue2: Pages 300-320. https://doi.org/10.1002/agr.21535
• Ready R. C., J. C. Buzby and D. Hu 1996. “Differences between Continuous and Discrete Contingent Value Estimates.” Land Economics, Vol. 72(3): 397-411. https://doi.org/10.2307/3147205
• Ready R.C. and D. Hu1995 “Statistical Approaches to the Fat Tail Problem for Dichotomous Choice Contingent Valuation.” Land Economics, Vol. 71(4): 491-499. https://www.jstor.org/stable/3146713?seq=1
• Ready R. C., S. Navrud and W. R. Dubourg 2001. “How Do Respondents with Uncertain Willingness to Pay Answer Contingent Valuation Questions?” Land Economics, Vol. 77(3):315-326. https://www.jstor.org/stable/3147126?seq=1
• Shorgen J. A..2005. “Experimental Methods and Valuation”. Handbook of Environmental Economics, Chapter 19, Vol.2.
• Vossler C. A., M. Doyou, and D. Rondeau (2012) “Truth in Consequentionality: Theory and Field Evidence on Discrete Choice Experiments.” American Economic Journal: Microeconomics: 2012:4(4):145-171. https://www.jstor.org/stable/23358364
• Yu. X., Z. Gao and S. Shimokawa (2016) “Consumer Preferences for US Beef Products: A Meta-Analysis”. Italian Review of Agricultural Economics (REA) 2016(2): 177-195. https://doi.org/10.13128/REA-20078
• Yu X. and David Abler (2010): “Incorporating Zero and Missing Responses into CVM with Open-Ended Bidding: Willingness to Pay for Blue Skies in Beijing.” Environment and Development Economics, Vol.15:535-556. https://doi.org/10.1017/S1355770X10000197
• Yu X., Z. Gao and Y. Zeng (2014). Willingness to Pay for the ‘Green Food’ in China. Food Policy Vol. (45):80-87. https://doi.org/10.1016/j.foodpol.2014.01.003
• Yu X., B. Yan and Z. Gao (2014). Can Willingness-To-Pay Values be Manipulated? Evidences from an Experiment on Organic Food in China, Agricultural Economics. https://doi.org/10.1111/agec.12134
• Zhou J., Q. Liu, R. Mao, Xiaohua Yu. (2017) “Habit Spillovers or Induced Awareness: Willingness to Pay for Eco-Labels of Rice in China”. Food Policy, 71, 2017: 62-73. https://doi.org/10.1016/j.foodpol.2017.07.006
• Zhou S., X. Yu, and D. Koemle (2017) Policy Choices for Air Pollution Abatement in Beijing: Status Quo or Change. Singapore Economic Review. https://doi.org/10.1142/S0217590817410028