A Comparative Analysis of Parametric and Non-parametric Approach of Contingent Valuation Method for Estimating the Preservation Value of Marine Ranching Projects

The paper estimates the preservation value(willingness-to-pay, WTP) for marine ranching project, using parametric and non-parametric approach in contingent valuation method(CVM). For parametric approach, logit models are employed in double-bounded dichotomous choice format of CVM. For non-parametric approach, linear interpolation method is used, developed by Boman et al.(1999). There are several significant advantages of non-parametric approach, compared to parametric methods. That is, no probability distribution assumption is necessary so that there are no needs to assume or test goodness of fit, model specification and heteroscedasticity statistically. For the reliability and the validity of contingent valuation method, a survey was conducted for 512 respondents sampled by stratified random sampling method, by online panel method. The result of median WTP was estimated to be 4,780 won to 4,827 won per year per household in parametric approach, while median WTP being 3,261 won in non-parametric approach. Provided that our sample is broadly representative of the Korean population, an estimate of the annual aggregated preservation value in Korea is approximately 26.8 billion won to 183 billion won.