Obtaining welfare bounds in discrete-response valuation studies:: A non-parametric approach

Welfare change estimates obtained from discrete-response contingent valuation experiments normally assume a particular distribution of,willingness-to-pay (WTP). Using conventional microeconomic theory, we derive upper and lower bounds on such estimates. These bounds are interpreted statistically in terms of non-parametric estimators of mean WTP and its variance. Two contingent valuation surveys illustrate the proposed bounds, and the performances of the variance estimators are scrutinized with a Monte Carlo simulation. All calculations can be made by hand, simplifying communication among those involved in interpreting results from contingent valuation studies using discrete-response data. (JEL Q26).