The International Yearbook of Environmental and Resource Economics 2003/2004

The International Yearbook of Environmental and Resource Economics 2003/2004

A Survey of Current Issues

New Horizons in Environmental Economics series

Edited by Henk Folmer and Tom Tietenberg

This major annual publication provides a state-of-the-art survey of contemporary research on environmental and resource economics by some of the leading experts in the field.

Chapter 7: Stated preference methods for environmental valuation: a critical look

Bengt Kriström and Thomas Laitila

Subjects: economics and finance, environmental economics, environment, environmental economics


Bengt Kriström and Thomas Laitila I. INTRODUCTION There is now a substantial literature in environmental economics on valuation of non-market goods. Contingent valuation (CV) is the most prominent (and controversial) of the empirical methods in current use. Stripped down to its bare essentials, CV is a carefully structured survey, in which one tries to obtain information about the value subjects place on certain changes of resource usage. In this chapter, we provide a user’s guide to a group of similar methods that has risen quickly in popularity within environmental economics. These methods have been used for many years in the transportation and marketing research literature, but seem useful also to environmental economists. There is significant confusion about the nomenclature to be used, and the methods we shall describe are sometimes known as ‘conjoint analysis’, ‘stated preference’ or ‘stated choice’, to name a few popular labels. We might contribute to the terminological inexactitudes by employing our preferred labels for the methods.1 We describe stated preference (SP) methods and choice experiments (CE). SP methods are used to estimate a utility function defined over attributes (characteristics). CE mimics actual behaviour since respondents make choices within a specified choice set. We do not provide a survey of the literature, not least because there are many useful and recent accounts to which the interested reader is referred, for example Louviere et al. (2000) and Adamowicz et al. (1998). Bergland (2001) gives a concise technical overview. This account differentiates itself from...

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