MR Microinsurance_2012_03_29.indd - International Labour ...

158 Health insurance
7.1 Methods of eliciting WTP
A crucial methodological question in CV is how WTP information can be elicited.
For one, replies could be influenced by the product in question and by characteristics
of the target population. However, the process of elicitation can affect
the results of CV surveys, in areas such as 1) how the information is obtained and
presented; is it clear and complete? Can people imagine the situation? 2) How
would people pay for the health event (e.g. out-of-pocket, by taxation or private
health insurance?) 3) Over what time period is the product valued? This provides
the respondent’s budget and cash-flow constraints. 4) How is the survey administered?
(e.g. individual or group responses?).
There is considerable debate on the precise format in which the questions should
be asked, because each possible format appears prone to some bias (see Table 7.1).
7.1.1 Open-ended format
CV applications started with the use of open-ended formats, in which respondents
were asked to state the amount that best matched their valuation of the
hypothetical insurance package presented. Respondents found it difficult to
answer these questions, leading to low response rates and a high degree of
variation. Because of the disappointing results, alternative closed-end elicitation
formats were developed.
7.1.2 Closed-end formats
The “bidding game” (BG) is an example of a closed-end elicitation format, in
which the respondent is asked whether he or she is willing to pay a specific
amount. Depending on the answer, the bid is lowered or raised and the individual
is asked about this new bid (“bi-directional BG”). This process continues
until the maximum WTP amount is found. Alternatively, “unidirectional” BG
could be either ascending, in which case the initial bid is very low and is
increased until respondents reject the offer; or descending, in which the initial
bid is very high and is lowered until respondents accept the bid. The descending
BG is assumed to yield a higher WTP. A problem with the BG is that the maximum
in the auction process can be influenced by the amount of the first bid; a
higher first bid was reported to result in a higher WTP. This is called “startingpoint
bias”.
Another method, called the “dichotomous choice technique” (DC) involves
asking subjects to answer the question as to whether they would pay a specified
amount for a given commodity with “yes” or “no”. The demand curve is estimated
by varying the bid amount across respondents and the area under this
demand curve represents mean WTP.