WILLINGNESS TO PAY - Shodhganga

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willingness to pay to avoid another episode of the diseases which they were presently .... FS 3 to 5 and 7 to 9 & above were also seen to opt bid second.
Chapter – 5 Willingness to Pay

WILLINGNESS TO PAY In economics, the willingness to pay (WTP) is the maximum amount a person would be willing to pay, sacrifice or exchange in order to receive a good or to avoid something undesired, such as pollution. This term stands in contrast to willingness to accept payment (WTA), which is the minimum amount an individual is willing to receive to give up a good or to accept something undesirable. Three methods

are available to

measure consumer willingness to pay. These methods can be differentiated whether they measure consumers' hypothetical or actual willingness to pay and whether they measure consumer willingness to pay directly or indirectly. The three methods considered are the contingent valuation (CV), cost of illness (COI) and the defensive behaviour approaches. The CV approach, which involves asking people what they are willing to pay to reduce/avoid the number of symptom days or illnesses they experience as a result of exposure to pollution. The defensive behaviour approach infers peoples’ WTP to reduce or avoid exposure to pollution from the amounts of money they spend on precautionary action taken. The COI approach on the other hand uses available data on medical expenditures and other costs (out-of-pocket expenses), as well as opportunity costs (foregone earnings being the most obvious example), to infer a lower bound to WTP to reduce pollution.3 Both these approaches, unlike the CV method are indirect approaches used in inferring individuals’ WTP for pollution control. Contingent valuation is one of the most popular methods to assess the value of public goods. It uses survey methods to elicit consumers preference by finding out how much consumers would be willing to pay for specified changes in the level of provision of a public good. Hence, in this study contingent valuation method of WTP has been used as it is more favorable to Indian environment. A stated preference method to measure WTP was based on CV. CV involves asking individuals directly maximum amount they are willing to spend to have the commodity in question. WTP estimates require a respondent to assess the prospects for expenditure on the basis of prior and present day experience to consider the prospects of eliminating the risk of infection given that the respondent have had recent experience with the diseases (recently suffering for the diseases) or potential to assess future Page | 105

Chapter – 5 Willingness to Pay possibilities that is to consider the possible cost of becoming infected whether or not they had any experience of the disease. The respondents who had recently experienced the diseases when asked about the willingness to pay to avoid another episode of the diseases which they were presently experiencing were fairly certain about the economic and welfare losses associated with the episode of illness such as expenditures for treatment of diseases, lost productivity and disutility due to the disease. For evaluation of WTP the respondent were asked to speculate a situation in which they would definitely be infected in the next year with one which they have experience and then they were asked to how much they would be willing to pay to avoid such condition. In this regard the respondents were given four bid options as mentioned below in which they would like to invest for availing the benefits package.

TABLE – 5.1 WILLINGNESS TO PAY BID OPTIONS BID S.No BID AMOUNT

BENEFITS OPTED

1

2

Up to `1,000 `1,001 to

Hospitalization, medical expenses, for the 482 period of 30 to 60 days. Hospitalization (up to `1,00,000) Daycare

treatment, Local road Ambulance Services, 1571

`2,500

3

`2,501 to

Hospital Daily Allowance Cost, Income tax Benefit.

Hospitalization (up to `2,00,000) Daycare

treatment, Local road Ambulance Services, 563

`5,000

4

Above `5,000

Health Check

Hospital Daily Allowance

Health Check

Cost, Income tax Benefit.

268

Hospitalization (up to `3,00,000) Daycare

treatment, Maximum renewal upto 65 year, Page | 106

Chapter – 5 Willingness to Pay Local road Ambulance Services, Hospital Daily Allowance

Health Check Cost,

Income tax Benefit.

Out of 3,000 respondents 116 respondent were unwilling to pay amount to secure the risk. Out of the remaining 2,884 respondent 1,571 respondent were willing to spend between ` 1,001 to ` 2,500, a 563 respondent opted to spend ` 2,501 to ` 5,000, 482 respondent were eager to spend up to `1,000 and rest 268 respondent select the highest amount bid of ` 5,000 and above.

TABLE – 5.2 WILLINGNESS TO PAY AS PER INCOME SIZE HHI BID’s Up to ` 50,000 `51,000 to `1,00,000 `1,00,001 to `2,00,000 `2,00,001 to `3,00,000 `3,00,001 to `5,00,000 Above `5,00,00

Up to `1,000

`1,001 to `2,500

Above `5,000

65

`2,501 to `5,000

31

10

3

(1.07%)

(2.25%)

(0.34%)

(0.10%)

88

266

28

19

(3.05%)

(9.22%)

(0.97%)

(0.66%)

338

1153

227

60)

(11.71%)

(39.97%)

(7.87%)

(2.11%

21

74

161

174

(.73%)

(2.57%)

(5.83%)

(6.03%)

3

10

130

5

(0.10%)

(0.35%)

(4.51%)

(0.17%)

1

10

7

0

(0.03%)

(0.35%)

(0.24%)

(0.0%)

The respondent opting for various bids were further classified as per the household income. It was found that the maximum respondents (338) opting for 1st bid i.e. up to ` 1,000 were from the income group of ` 1, 00,000 – ` 2, 00,000. Similar situation were Page | 107

Chapter – 5 Willingness to Pay found in the case of second and third bid. 1,153 respondent belonged to house hold income of ` 1, 00,001 – ` 2, 00,000 for second bid and 227 respondent for the third bid. However respondent opting for the last bid, the maximum respondent were from the

house hold income of ` 2, 00,000 – ` 3, 00,000. Respondent having the house hold income of ` 5, 00,000 were least interested in WTP.

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Chapter – 5 Willingness to Pay

TABLE – 5.3 WILLINGNESS TO PAY AS PER FAMILY SIZE

WTP BID

PERSON IN FAMILY 1 2 3 4 5 6 7 8 9 & Above TOTAL

Up to `1,000 35 (1.21%) 81 (2.81%) 13 (0.45%) 51 (1.77%) 101 (3.50%) 197 (6.83%) 3 (0.10%) 1 (0.03%) 0 (0.0%) 482 (16.7%)

`1,001 to `2,500 6 (0.21%) 34 (1.18%) 85 (2.95%) 524 (18.17) 190 (6.59%) 411 (14.25%) 142 (4.92%) 136 (4.72%) 43 (1.49%) 1571 (54.4%)

`2,501 to `5,000 21 (0.72%) 13 (0.45%) 9 (0.31%) 161 (5.58%) 261 (9.05%) 91 (3.16%) 7 (0.25%) 0 (0.0%) 0 (0.0%) 563 (19.6%)

Above `5,000 7 (0.24%) 17 (0.59%) 14 (0.49%) 140 (4.85%) 12 (.416%) 34 (1.18%) 21 (0.73%) 21 (0.73%) 2 (0.07%) 268 (9.3%)

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Chapter – 5 Willingness to Pay

An attempt was also made to identify the WTP as per the family size (FS) of the respondent. Maximum respondent (35) in their family wished to offer bid one i.e.

`

1,000. Similar situation was found in case of FS having two people (81). The maximum respondent in the FS of 5 opted for bid three. Maximum respondent in the FS 3 to 5 and 7 to 9 & above were also seen to opt bid second.

Thus the above analysis makes clear that inspite of increase in the family size the amount of investment did not increase. Hardly any interest was shown for the highest bids.

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