BEEM126 – Experimental and Behavioural Economics Assignment
by Siriya WONGTIP 670051062
1. Write a 1-sentence research question. (10% 40 words)
How difference of willingness to pay for environmental protection is between enforced tax and voluntary "Environmental Protection Cost" donation ? : A study in Thailand.
2. What are the advantages and disadvantages of using an experiment to find an answer to your research question? (20% 200 words)
Expressing willingness to pay for environmental both tax and voluntary is specified by the respondents in local. Moreover, all respondents have to acknowledge the real situation told by researcher before answer to the questions in survey. In addition, questionnaires in survey need respondents to explain the reasons of decision. Regarding to these conditions, conducting a new experiment to find answers is necessary process to answer the research question. Comparing to empirical method or obtaining secondary data from the other sources, running a particularized experiment could generate exactly results which answering directly to the question under constraint circumstances. Nevertheless, there are disadvantages and limitations of using an experiment. First, the scope of study is the whole country, while the survey can conduct cover a group of samples which claim to be used as representative of populations. This leads to more attention of samples selection in both quality and quantity to assure that group of samples precisely reflect the population. Secondly, although the experiment could reveal the willingness to pay for environmental, respondents are not going to pay as they quoted in questionnaires. The respondents may realize an unreal loss when they making a decision. The consequence could alter the results.
3. In addition to experiments, what empirical methodologies could you use to answer your question? What are their advantages over experiments and their limitations? (20% 1,500 words)
In an experiment, the sample are equally divided into 3 groups, 300 respondents in each, which are Control group (all forced to pay tax 1% of incomes), Dictator group (all are voluntary donation which can choose amount to donate by themselves, they also can choose not to pay), and Treatment group (the respondents can choose formed of pay whether tax or voluntary donation). The method have been used in this experiment is contingent valuation method (CVM). At the beginning, the respondents will be explained about the step of survey which are understanding current situation of environment in Thailand, answering the question in willingness to pay part, and giving general personal information, for example, income, age, and region of resident. The respondents must have equally necessary knowledge of situation before they answer the question. This can reduce asymmetric information biases. There are two important conditions of survey revealing real willingness to pay of respondents are less directly contact and anonymous. An experiment is designed to conduct through online survey for reducing pressure of encountering between researcher and respondents. Therefore, only respondents will know their answer and leads to precisely answer to their decisions without pretending to be natural lovers. The same description can be used with anonymous. The less identified characteristics of respondents, the more precise answer researcher gets.
The first part of questionnaire required respondents to rank between 0 to 1 with one decimal (0, 0.1, 0.2, …, 0.9, 1) of the willingness to pay for environmental. this question will ask in all three groups (Control, Dictator, and Treatment). The query to divided respondents into three groups instead of two could help to reflect "Participation expectation effect" (Wiser, 2005) which individuals who are willing to pay expect other to reciprocate. According to this effect, Treatment group is established to test this assumption in condition that respondents will choose enforced tax rather than voluntary donation to guarantee of other respondents' payments. Next, they have to explain the reason for paying decision. The survey will guide 3 main answers for choosing to pay which are conservation for present use, conservation for future use, and conservation for next generation. In case of decided not to pay, they still have to define their argument. The main guidance answers are payment is belong to government duty, no ability to pay, and corruption issues. However, respondents can raise another reasons by their own. Third, respondents will be asked whether it important to protect environmental. This are called as attitude towards environmental protection question. Fourth, the same form of previous about impressive of currently environment situation is asked. The answer of these questions can divide into 3 answers, negative, neutral, and positive. The last query in this part is amount to pay. In case of control group and treatment group who choose to pay tax, the amount to pay will calculate by using their income time with 1%. On the contrary, respondents who have voluntary donation scheme will quote amount to pay by themselves. It could range from zero but not exceed their income.
Moving forward to personal information part, respondents need to reveal their gender, age, education level, region of residence, and income. Region of residence might matter with the results because different region in Thailand have different culture involving natural. In order to analyze this factor, region of residence will be used to examine.
After obtained responded resulted, analyzing data is the next step to interpret data. For willingness to pay for environmental protection, the study will use Tobit model for analysis. While in amount to pay investigation, Ordinary Least Square (OLS) regression will used instead. The equation are as following;
Willingness to pay = β0 + β1(GENDER) + β2(AGE) + β3(EDUCATION)
+ β4(INCOME) + β5(RESIDENCE) + β6(ATTITUDE)
+ β7(KIND_OF_PAYING) + ε (1)
Amount to pay = β0 + β1(GENDER) + β2(AGE) + β3(EDUCATION) + β4(INCOME)
+ β5(RESIDENCE) + β6(ATTITUDE) + β7(PAYMENT_MODE)
+ β8(WILLINGNESS_TO_PAY) + ε (2)
Apart from the core variables in equation (1), additional independent variables are added tin process analyze factors influence amount to pay, mode of payment and willingness to pay.
This study had run regression willingness to pay and amount to pay separately because environmental protection is not a normal goods as same as other goods. Conversely, environmental protection concerned as public goods which needed realization from all populations. Therefore, willingness to pay have to be defined in term of respondents' intentions more than financial payment in order to investigate participation of respondents in environmental protection.
In conclusion, comparison of willingness to pay and amount to pay between enforced tax and voluntary donation will be made in order to figure out the most effective sources of environmental protection incomes in both willingness to pay and amount of income dimensions. Moreover, personal characteristics such as age, education, and gender, will also addressed how influence to willingness to pay and amount to pay.
As shown above, experiment limited the study in process of obtained information while empirical methodologies became an important part to figure out the relationship and difference of variables of study in interpretation mechanism. Contingent valuation method (CVM) conducted in this study using stated willingness to pay in order to allow respondents stated directly and avoiding inconsistency of choice decision making. In general CVM methods, respondents will be given situations and they have to choose one optional in each situation. This could cause inconsistency of making decision. Moreover, in some case that giving respondents choice to pay in specified amount which respondents are not allow to determine by themselves. They might choose not to pay because the choice to pay are too higher in fact that they needed to pay in lower amount. Eliminating inconsistency and unwanted choice decision making is advantages of using CVM in directly stated willingness to pay. However, allowing respondents specify their own amount and willingness to pay still have disadvantage. According to preference of each respondents, scales of willingness to pay ranking may not exactly same in every respondents. To conquer this issues, more samples could help to standardize willingness to pay ranking. Another issues of this method is unreal situation. As stated in previous section, this study is planned to conduct as laboratory experiment. Therefore, there is no real loss for tax or voluntary donation happened which is the main issue to shift the results from the real situation.
4. Summarize the literature on the research question you proposed, including experimental and non-experimental research. (50% 3,000 words)
In recent years, environmental protection had been considered because of perilous threats effected from global warming and climate changed. Many countries around the world such as India, China, and Greece have been awakened to solved environmental issues by using economic tools, especially environmental tax and voluntary donations. To begin with, Han, Wang, Xu, & Yang (2010) have been studied