Three reasons to use annual payments in contingent valuation surveys: Convergent validity, discount rates, and mental accounting

• We present three arguments for using ongoing payments in contingent valuation surveys.
• The discount rate is irrelevant when comparing benefit streams with cost streams.
• Results from CV surveys with annual payments better match travel cost results.
• Budget constraints are more likely to bind when facing large one-time payments.

We present three arguments for using ongoing annual payments in contingent valuation (CV) surveys that estimate the benefit of a long-lasting environmental improvement. First, by matching the duration of the payments with the duration of the environmental benefits, survey respondents are spared from performing complicated present value calculations. Second, willingness to pay (WTP) estimates from CV surveys that include ongoing annual payments best match WTP estimates obtained using travel cost surveys. Third, respondents are less likely to face binding mental budget constraints with ongoing annual payments than with a larger one-time payment. In addition, respondents’ discount rates may be estimated by collecting non-hypothetical, individual time preference data as part of the valuation survey.