Nonmarket Valuation Flashcards
Nonmarket Valuation
methods of valuing amenities that don’t naturally have a monetary value
Total Economic Value
Use Value - Nonuse Value
Use Value
the value people place on the use of a good or service
Direct Use Value
Value one obtains by directly using a good or service
Indirect Use Value
beneficial services provided freely by nature (i.e. flood protection, water purification, soil formation, etc.)
Extractive Direct Use Value (example)
value one gets from eating wild berries on a nature trail; you physically TAKE the good or service to enjoy its value
Nonextractive Direct Use Value (example)
value one gets from going on a walk in nature; you enjoy the value of the good or service without taking said good/service
Nonuse Value
values people obtain without actually sing the resource (i.e. good or service)
Option Value
value placed on the maintenance of future options for use
Bequest Value
value placed on the knowledge that a resource will be available for future generations
Existence Value
value placed on a resource that people do not intend to ever use
Willingness to Pay (WTP)
the maximum amount of money people are willing to pay for a good/service that increases their utility
Willingness to Accept (WTA)
the maximum amount of money people would willingly accept as compensation for an action that reduces their utility; tends to be higher that WTP
Endowment Effect (i.e. “Loss Aversion”)
people tend to put a higher value on something after they already possess it, relative to its value BEFORE they possessed it
Revealed Preference Methods
these methods infer value based on market decisions
Direct Revealed Preferences
preferences that identify values for goods/services by monitoring that good/service’s market
Indirect Revealed Preference Methods
methods that look at adjacent markets
Travel Cost Method
using actual visitation expenditures to establish a lower bound to an individual’s WTP to visit a particular site/environmental amenity
Hedonic Pricing Models
decomposing a market’s valuation of a good/service to establish values for different characteristics in the good/service (ex. Property Value (Use Value) and Wage Value (lower bound of WTP))
Replacement Cost Methods
estimating cost necessary to replace or store a resource
Defensive Expenditure Methods
valuation based on the expenditures households take to avoid or mitigate their exposure to a pollutant
Stated Preference Methods
asking people about their values
Contingent Valuation
DIRECTLY asking respondents for their values; i.e. “How much?”, “Would you pay/accept…”
Contingent Ranking
INDIRECTLY asking for values by having respondents rank options
