Abstract
Contingent Valuation (CV) has become one of the most frequently used environmental valuation techniques in recent research developments. However, environmental valuation through stated preference such as CV might be biased because of the hypothetical nature of the collected data. Nevertheless, credibility of CV results in Japan has rarely been focused in the past research. We conducted CV questionnaire on organic vegetables as an example and compare questionnaire results with sales experiments in retail stores, which accompanies real payments. As a result, it was made clear that average Willingness to Pay (WTP) in CV is approximately 55% larger than sales experiments. It might be problematic to use CV results directly in cost-benefit analysis. Production cost of organic vegetables is calculated and used as supply curve in surplus analysis along with demand curve estimated through CV. Organic vegetable production will not automatically raise consumers' welfare level due to the higher price attributed to higher production cost. Production incentive for producers is quite low according to decrease in sale amount due to the severe competition against substitute goods. Wage per unit hour received by farmers will also be reduced because of the longer labor hour inputted in organic vegetable production. Social benefit of waste reduction brought by organic vegetable production has to be internalized by constructing incentive scheme. Governmental subsidies are one of the policy options that have to be considered.
