10. Non-market valuation Flashcards
(20 cards)
What are the 6 ways we estimate the costs and benefits of environmental protection and use?
- Willingness to pay
- Measuring demand
- Revealed preference
- Defensive expenditures
- Travel costs
- Contingent valuation
What does value mean?
Value of an environmental good is the amount of stuff that people would be willing to give up to improve environmental quality and still be equally well off
What is willingness to pay?
The amount which if paid in exchange for a good or service leaves the person as well off as without paying and without recieving the good or service
What does marginal damage show?
The loss from an extra unit starting at quantity q
What is MD equal to?
MD = - MWTP
What are the two methods for measuring the demand for goods?
- Revealed preference
- Stated preference
What does revealed preference mean?
Infer the value of environmental goods from other market transactions
What is hedonic analysis?
Use of prices for homes, land and jobs to reveal the value of an attribute of the price
What is stated preference?
Ask individuals use hypothetical situation, contingent valuation
What are defensive expenditures?
They are a type of revealed preference that use the prices for goods that prevent damage to reveal demand
What are the pros of revealed preference?
We can infer things and get an estimate using observed data
What are the cons of revealed preference?
The observed choices only capture some of the total value of the environmental resource
What is a pro of stated preference?
Can directly examine individuals valuation for goods even when the market does not exist
What are cons of stated preference?
The situations are hypothetical and survey respondents may not answer accurately
What is the intuition behind using defensive expenditures?
People that spend money to reduce an environmental bad must value the reduction at least as much as these costs
How do defensive expenditures translate into benefits to individuals?
Defensive expenditures are a lower bound on the benefits individuals would receive if the harm were removed
What is the intuition behind using travel costs as a measure of revealed preference?
Visiting a site takes time and money, so those who visit it must value it at least as much as these costs
How does Contingent valuation work?
Tries to value impacts where there is no market by asking people their Willingness to Pay for a specific improvement or action
Why do many not see CV studies as good practise?
- Over-looks substitutes
- No budget constraint (no real money at stake)
What is the method used to obtain non-use values?
Contingent Valuation
