Using Conjoint Analysis to Derive Estimates of Compensating Variation

We use several approaches to derive estimates of Hicksian compensating variation from conjoint ratings data. The different estimation approaches produced mixed results with respect to consistency with utility theory, statistical significance of key variables, magnitude of welfare estimates, and confidence bounds on welfare estimates. These findings suggest conjoint analyses are not a panacea for the problems being debated regarding contingent-valuation and travel-cost methodologies, and conjoint questions appear to share many of the advantages and disadvantages associated with dichotomous-choice, contingent-valuation questions.