Author(s): Marcus Martinsson

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Abstract: This paper investigates how ecological baselines influence stated preferences and willingness-to-pay (WTP) for environmental improvements in regulated river systems. Using a discrete choice experiment (DCE) conducted in Sweden’s hydropower-affected Mo and Gide rivers, we examine the sensitivity of preferences to both the magnitude of ecological change (scope) and the initial ecological conditions from which improvements occur. Respondents faced repeated choice tasks involving river restoration programs characterized by changes in salmon populations, otter presence, and riverine ecological quality, alongside a cost attribute. We estimate a series of random utility models to capture preference heterogeneity and test alternative representations of ecological change, including linear, non-linear, and piecewise formulations. The analysis focuses on whether WTP is consistent with theoretical expectations of scope sensitivity and how baseline ecological conditions affect marginal valuations. We assess whether identical improvements yield different WTP depending on the initial state of the ecosystem, thereby contributing to the literature on reference dependence and embedding effects in environmental valuation. Our findings provide evidence on the importance of baseline specification in DCE design and interpretation, with implications for benefit transfer and policy appraisal in the context of hydropower relicensing under the EU Water Framework Directive. The results highlight that ignoring baseline conditions may bias welfare estimates and lead to misleading conclusions about the value of ecological restorations.

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Year: 2026