Bound and path effects in double and triple bounded dichotomous choice contingent valuation

Dichotomous choice contingent valuation questions are relatively inefficient in that large sample sizes are required for a given level of estimation precision. An increasingly common approach to this problem is to supplement the initial question with subsequent dichotomous choice questions in a multiple-bound design. However, a number of commentators have suggested that such designs may generate responses which are internally inconsistent in that the distribution of underlying preferences implied by answers to the initial question may not be the same as that implied by the entire sequence of replies. We consider a variety of potential causes of such inconsistencies and use data from a contingent valuation study with two follow-ups and post survey debriefing focus groups to test both the effects caused by moving from one bound to another and those caused when respondents follow either the bid-increasing path generated by a positive response at a given bid amount, or the bid-decreasing path generated by negative responses. Results indicate that both bound and path effects are significant and generate a pattern corresponding to certain of the causes of inconsistency identified in the paper. Conclusions for the future application of such designs are presented.