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ValuationofEnvironmentalBenefits
ContingentValuationMethod:ExampleCarson,Mitchell,Hanemann,Kopp,PresserandRuud,2003DamagesfromtheExxonValdezOilSpillTheStateofAlaskafortheExxonValdezlitigation/6396954143756239105
DecomposingBenefitsUseValueBenefitsfromusingthegood/service,directlyorindirectly.Forexample,benefitsofcleanairtoGrandCanyonvisitors.OptionValueBenefitspeoplereceivenowfromhavingoptiontousegood/serviceinthefuture.Forexample,forpeoplewhomightvisitGrandCanyoninthefuture,benefits(now)ofpreservingGrandCanyon.ExistenceValueBenefitspeoplereceivefromknowledgeoftheexistenceofgood/service(theyneverintendtouse).Forexample,forpeoplewhomightnevervisitGrandCanyon,benefitsofpreservingGrandCanyon.Foroptionandexistencevalue,wehavenochoice—mustusestatedpreferencemethods
WillingnesstoPayandWillingnesstoAcceptWillingnesstopay(WTP)isthemaximumamountapersonwouldbewillingtopay,sacrificeorexchangeinordertoreceiveagoodortoavoidsomethingundesired,suchaspollution.LinkstoDemandFunction.Willingnesstoaccept(WTA)istheminimumamountanindividualiswillingtoreceivetogiveupagoodortoacceptsomethingundesirable.
EstimateDemand(WTP/WTA)forEnvironmentalGoods/ServicesRevealedPreferenceMethod:Usepeople’sobservedbehaviorinmarketstoinfertheirWTPforenvironmentalgoods/services;Hedonics:priceofaconventionalgoodvariesasquantityofclosely-relatedenvironmentalgoodchanges(propertyandwage)HouseholdProduction:consumerscombineprivategoodwithenvironmentalgoodto“produce”another,whichisrealsourceofutility
EstimateDemand(WTP/WTA)forEnvironmentalGoods/ServicesStatedPreferenceMethod:DesignsurveysthataskpeoplewhattheywouldbeWTPorWTA(ContingentValuation)ChoiceExperimentEconomistspreferrevealedpreferencemethods(reliable)
ContingentValuationMethodCompone
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