Topic 4

Question 1

Describe the different types of value.

Answer 1

Use value - willingness to pay for direct use (active vs. passive)

Existence value - “the idea of it”, WTP to preserve it

Option value - WTP for the future ability to use the resource

all three summed = total value

Question 2

stock vs. flow

Answer 2

stock - trees standing in a forest
flow - harvest of timber from that forest

value of the stock should be equal to the present value of the flow of services from that stock

Question 3

What are the direct stated preference methods for valuation?

Answer 3

contingent valuation - generally a survey that creates a hypothetical market
benefit transfers

Question 4

What are the indirect stated preference methods for valuation?

Answer 4

contingent ranking - attribute based methods, choice experiments, conjoint models

Question 5

What are the direct revealed preference methods of valuation?

Answer 5

market price

simulated markets - auctions

Question 6

What are the indirect revealed preference methods of valuation?

Answer 6

*use surrogate markets
travel cost - cost spent getting to a site as a measure of its value
hedonic property values and wages - regression analysis to infer environmental values from spending on goods that include those values
avoidance expenditures - WTP to reduce damage (lower bound estimate)

Question 7

What is VSL?

Answer 7

value of a statistical life

forgone earnings used as a determinant (productivity value)

Question 8

What is QALY?

Answer 8

Quality Adjusted Life Years

not just about being alive or dead, but enjoyable years

Question 9

What is expected value of net benefits?

Answer 9

probability of outcome * value of outcome

then all summed together = total expected value