Module 4302
Consumer Economics 2: Theory and Application for Valuing Non-Market Goods

Instructor

Prof. Xiaohua YU Ph.D., University of Göttingen
Email: xyu@gwdg.de; Tel: 0551-3919574, Office: 10.121

Lecture Time: 9:00 am, 10.Aug. 2026 – 12:15 am, 14. Aug. 2026

Prerequisite courses: Introductory econometrics and R/Stata Software
Course Description
The techniques of valuating non-market goods are widely used for agribusiness and environmental economics. This course is designed for graduate-level students at the University of Göttingen and some other related universities, and helps understand the fundamental economic theory of non-market goods and master basic econometric techniques for applications.
This course includes three parts: Part I introduces the basic theory; Part II introduces the econometric techniques; and Part III is practice with the real data.
Course Outline
1 Introduction
Part I: Basic Theory
2 Measurements of Welfare Changes
2.1 Individual Preferences and Demand
2.2 Welfare Measures for Changes in Prices
2.3 Welfare Measures for Changes in Factor Prices
2.4 Welfare Measures for Quantity Changes
2.5 Aggregation and Social Welfare
3 Revealed Preference Models of Valuation
3.1 Environmental Quality as a Factor Input
3.2 Individual Demand for Environmental Quality
3.3 The Structure of Preference: Complements or Substitutes
3.4 Discrete Choice Models and Measures of Values
4 Stated Preference Models of Valuation
4.1 Welfare Economics of Stated Preference Questions
4.2 Validity of Stated Preference Welfare Measure
4.3 Psychological Fundament of Stated Preferences
5 Values under uncertainty
5.1 Individual Preferences and Expected Utility
5.2 Aggregation and the Welfare Criterion
5.3 Revealed Preference Methods under Uncertainty
Part II: Methods and Econometric Techniques
6. Econometrics of Limited Dependent Variables
6.1 MLE.
6.2 Maximum Simulated Likelihood
6.3 Probit and Logit
6.4 Tobit, Cragg Model, and Heckman Model
7 Contingent Valuation Methods (CVM)
7.1 Continuous Methods: Open-Ended and Payment Cards
7.2 Discrete methods: Single-Bounded and Double Bounded
8 Choice Experiments (CE)
8.1 Experiment Design
8.2 Econometric Estimation
9 Experimental Auction
9.1 Auction Design
9.2 WTP Estimation
10 Hedonic Techniques
10.1 Basic Theory
10.2 Model Specification and Estimation
10.3 Measurement of Welfare Changes
Part III: Practice
11 Lab Sessions
Textbook:

• Freedman A. M.2003 The Measurement of Environment and Resource Values: Theory and Methods (2nd Edition), Resource for the Future, 2003.

Readings and References

• Antle J. M. 2001. “Economic Analysis of Food Safety”. B. L. Gardner & G. C. Rausser (ed.) Handbook of Agricultural Economics, Vol.1B (Chapter 19): 1083-1136.
• Dannenberg A. 2009“The Dispersion and Development of Consumer Preferences for Genetically Modified Food — A meta-analysis”, Ecological Economics, Vol.68:2182-2192.
• Deaton A. and J. Muellbauer. 1980. Economics and Consumer Behavior. Cambridge: Cambridge University Press.
• Carson R.T. and W. M. Hanemann.2005. “Contingent Valuation”. Handbook of Environmental Economics, Chapter 17, Vol.2: 821-936.
• Fischhoff A. 2005. “Cognitive Processes in Stated Preference Methods”. Handbook of Environmental Economics, Chapter 18, Vol.2.
• Giampietri E. , D. Koemle, X. Yu and A. Finco (2016) Consumers’ Sense of Farmers’ Markets: Tasting Sustainability or Just Purchasing Food? Sustainability 2016, 8(11), 1157; doi:10.3390/su8111157.
• Gao Z., T. C. Schroeder and X. Yu, 2010 “Consumer Willingness to Pay for Cue Attributes: the Value beyond Its Owen”, Journal of International Food and Agribusiness Marketing, Vol.22(1):108-124.
• Gao Z., L. House and X. Yu (2010): “Using Choice Experiment to Estimate Consumer Valuation: the Role of Experiment Design and Attribute Information Loads”. Agricultural Economics, Vol. 41 (6)：555-565. http://ageconsearch.umn.edu/handle/49406
• Hanemann M. 1984. “Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses” American Journal of Agricultural Economics, Vol. 66(3): 332-341. https://onlinelibrary.wiley.com/doi/abs/10.2307/1240800
• Hanemann M., J. Loomis, and B. Kanninen, 1991. “Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation.” American Journal of Agricultural Economics, Vol. 73( 4):1255-1263. https://doi.org/10.2307/1242453
• Li Y., and X. Yu (2025) Attribute Non-Attendance in the Choice Experiment with Machine Learning: WTP for Organic Apples in Germany. Forthcoming in International Food and Agribusiness Management Review, https://doi.10.22434/IFAMR.1133 .
• Liu Y., Y. Zeng and X. Yu, 2009: Consumer Willingness to Pay for Food Safety in Beijing: A Case Study of Food Additives. Paper at the 27th Conference of International Association of Agricultural Economists (IAAE), 16-22 Aug., Beijing
• Lusk J. L. and T. C. Schroeder 2004. “Are Choice Experiments Incentive Compatible? A Test with Quality Differentiated Beef Steaks.” American Journal of Agricultural Economics, Vol. 86(2):467-82. https://doi.org/10.1111/j.0092-5853.2004.00592.x
• Maddala G.S. (1983) Limited Dependent and Qualitative Variables in Econometrics, Cambridge University Press,.
• Nelson J.P., Kennedy P.E., 2008, “The Use (and Abuse) of Meta-Analysis in Environmental and Natural Resource Economics: An Assessment”, downloaded from http://ssrn.com/abstract=1117490, 08/2008.
• Quan S., Y. Zeng, X. Yu and T. Bao (2018) WTP for Baby Milk Formula in China: Using Attribute Non-Attendance as a priori Information to Select Attributes in Choice Experiment. Agribusiness: An International Journal. Volume34, Issue2: Pages 300-320. https://doi.org/10.1002/agr.21535
• Ready R. C., J. C. Buzby and D. Hu 1996. “Differences between Continuous and Discrete Contingent Value Estimates.” Land Economics, Vol. 72,( 3): 397-411. https://doi.org/10.2307/3147205
• Ready R.C. and D. Hu1995 “Statistical Approaches to the Fat Tail Problem for Dichotomous Choice Contingent Valuation.” Land Economics, Vol. 71( 4): 491-499. https://www.jstor.org/stable/3146713?seq=1
• Ready R. C., S. Navrud and W. R. Dubourg 2001. “How Do Respondents with Uncertain Willingness to Pay Answer Contingent Valuation Questions?” Land Economics, Vol. 77( 3):315-326. https://www.jstor.org/stable/3147126?seq=1
• Shorgen J. A..2005. “Experimental Methods and Valuation”. Handbook of Environmental Economics, Chapter 19, Vol.2.
• Vossler C. A., M. Doyou, and D. Rondeau (2012) “Truth in Consequentionality: Theory and Field Evidence on Discrete Choice Experiments.” American Economic Journal: Microeconomics: 2012:4(4):145-171. https://www.jstor.org/stable/23358364
• Yu. X., Z. Gao and S. Shimokawa (2016) “Consumer Preferences for US Beef Products: A Meta-Analysis”. Italian Review of Agricultural Economics (REA) 2016(2): 177-195. https://doi.org/10.13128/REA-20078
• Yu X. and David Abler (2010): “Incorporating Zero and Missing Responses into CVM with Open-Ended Bidding: Willingness to Pay for Blue Skies in Beijing.” Environment and Development Economics, Vol.15:535-556.DOI: https://doi.org/10.1017/S1355770X10000197
• Yu X., Z. Gao and Y. Zeng (2014). Willingness to Pay for the ‘Green Food’ in China. Food Policy Vol. (45):80-87. https://doi.org/10.1016/j.foodpol.2014.01.003
• Yu X., B. Yan and Z. Gao (2014). Can Willingness-To-Pay Values be Manipulated? Evidences from an Experiment on Organic Food in China, Agricultural Economics. DOI: 10.1111/agec.12134
• Zhou J., Q. Liu, R. Mao, Xiaohua Yu.(2017) “Habit Spillovers or Induced Awareness: Willingness to Pay for Eco-Labels of Rice in China”. Food Policy, 71, 2017: 62-73. https://doi.org/10.1016/j.foodpol.2017.07.006
• Zhou S., X. Yu, and D. Koemle (2017) Policy Choices for Air Pollution Abatement in Beijing: Status Quo or Change. Singapore Economic Review. https://doi.org/10.1142/S0217590817410028

Teaching Method: Lectures + Lab Sessions
Language: English
Credits: 3
Grades: Participation and Exam

Note: Course schedule may be adjusted during the process.
Lab Session: Please prepare R package.
Download
R software：https://ftp.gwdg.de/pub/misc/cran/
Rstudio：https://www.rstudio.com/products/rstudio/
Classroom: Seminarraum 1 in der 9. Etage Blauer Turm (9th floor, Blue Tower) Platz d. Göttinger Sieben 5, 37073 Göttingen