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Stated preference scenarios often provide information on intermediate biophysical processes but omit information on the resulting final services that provide utility. This may cause respondents to speculate about the effects of intermediate outcomes on their welfare, leading to biased welfare estimates. This work clarifies distinctions between intermediate and final ecosystem services within stated preference valuation and develops a structural model by which to infer respondents’ speculations when a final ecosystem service is omitted. The model also derives implications for welfare estimates. Methods and results are illustrated using an application of choice experiments to fish restoration in Rhode Island’s Pawtuxet watershed.

Stated preference analyses commonly impose strong and unrealistic assumptions in response to spatial welfare heterogeneity. These include spatial homogeneity or continuous distance decay. Despite their ubiquity in the valuation literature, global assumptions such as these have been increasingly abandoned by non-economics disciplines in favor of approaches that allow for spatial patchiness. This paper develops parallel methods to evaluate local patchiness and hot spots in stated preference welfare estimates, characterizing relevant patterns overlooked by traditional approaches. The analysis draws from a choice experiment addressing river restoration. Results demonstrate shortcomings in standard treatments of spatial heterogeneity and insights available through alternative methods.