Valuation of reduced eutrophication in the Gulf of Finland: Choice Experiment with attention to heterogeneous and discontinuous preferences and respondent uncertainty

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Eutrophication is a serious problem in the Baltic Sea. This thesis aims at estimating the benefit to Finns from reduced eutrophication in the Gulf of Finland, the most eutrophied part of the Baltic Sea, by applying the choice experiment method. Because stated preference methods have been subject to criticism, e.g., due to their hypothetical survey context, this thesis contributes to the discussion by studying two anomalies that may lead to biased welfare estimates: respondent uncertainty and preference discontinuity. The former refers to the difficulty of stating one’s preferences for an environmental good in a hypothetical context. The latter implies a departure from the continuity assumption of conventional consumer theory, which forms the basis for the method and the analysis. In the three essays of the thesis, discrete choice data are analysed with the Multinomial Logit and Mixed Logit models.
On average, Finns are willing to contribute to the water quality improvement. The probability for willingness increases with residential or recreational contact with the gulf, higher than average income, younger than average age, and the absence of dependent children in the household. On average, for the respondents the relatively most important characteristic of water quality is water clarity followed by the desire for fewer occurrences of blue-green algae. For future nutrient reduction scenarios, the annual mean household willingness to pay estimates range from €271 to €448 and the aggregate welfare estimates for Finns range from €28 billion to €54 billion, depending on the model and the intensity of the reduction.
Out of the respondents (N=726), 72.1% state in a follow-up question that they are either “Certain” or “Quite certain” about their answer when choosing the preferred alternative in the experiment. Based on the analysis of other follow-up questions and another sample (N=307), 10.4% of the respondents are identified as potentially having discontinuous preferences. In relation to both anomalies, the respondent- and questionnaire-specific variables are found among the underlying causes and a departure from standard analysis may improve the model fit and the efficiency of estimates, depending on the chosen modelling
approach. The introduction of outcome uncertainty in the nutrient reduction scenario increases the acceptance of the proposed scenario which may indicate an increased credibility.
In conclusion, modelling preference heterogeneity is an essential part of the analysis of discrete choice data. The results regarding uncertainty in stating one’s preferences and non-standard choice behaviour are promising: accounting for these anomalies may improve the precision of the estimates, but the results cannot be generalized since the analysis was based on only one data set.
Tryckta ISBN978-952-10-6098-4
Elektroniska ISBN978-952-10-6099-1
StatusPublicerad - 2010
MoE-publikationstypG5 Doktorsavhandling (artikel)


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